Market Overview

2 Telecommunications ETFs Respond To Industry Price Wars

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2 Telecommunications ETFs Respond To Industry Price Wars

The telecommunications sector fell heavily on Tuesday, as Verizon Communications Inc. (NYSE: VZ) warned that fourth-quarter profit may take a dive on price wars in its wireless business.

This news sent shares of Verizon down more than 4 percent, and also impacted the stock price of competitors AT&T Inc. (NYSE: T) and Sprint Corporation (NYSE: S).

This recent news was also felt throughout the numerous ETFs that offer diversified access to these voice and data companies.

Related Link: What Is T-Mobile Doing With ETFs?

Vanguard Telecommunication Services

The Vanguard Telecommunication Services ETF (NYSE: VOX) is the largest ETF dedicated to this industry with over $800 million in total assets.

VOX tracks 30 stocks with a focus on traditional telephone, wireless, Internet and other data transmission businesses. As the industry behemoths, Verizon and AT&T make up 45 percent of the underlying holdings in VOX based on their large market capitalization.

So far this year, VOX has struggled to break out of a choppy consolidation, and more recently has fallen close to the flat line in 2014. This ETF is sitting on a meager gain of just 0.77 percent this year vs. a 17 percent gain in the broader Technology SPDR (ETF) (NYSE: XLK).

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iShares Global Telecom

Another ETF in this industry that can be used to express a global view is the iShares S&P Global Telecommunicat. (ETF) (NYSE: IXP). This fund tracks 47 telecom companies around the world with exposure to both foreign, developed and emerging markets.

In fact, the United States makes up only 34 percent of the underlying stock allocation in IXP. Other top country allocations include the United Kingdom, Japan and Canada.

This global focus has one benefit that manifests in a larger dividend yield than its U.S.-based VOX competitor. The current 30-day SEC yield on IXP is 4.59 percent, while VOX currently offers a 3.19 percent dividend.

Of course, if stock prices continue to fall, further incremental increases in these dividend paying stocks will be seen. Telecommunication companies are widely regarded as stalwart income producers because of their steady cash flows and inelastic demand.

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