Tags: Deutsche | Telecom | yield | DT

Deutsche Telecom: High Yield Despite Gloom

By    |   Monday, 05 Dec 2011 01:57 PM

German company Deutsche Telecom (DT) is the largest mobile communications provider in Europe and owns the T-Mobile cellular service in the United States. The stock currently sports a high dividend yield, but investors should be wary of the gloom in the European economy. Several factors, however, make this stock an interesting investment option for U.S. investors.

Shares of Deutsche Telecom trade in the United States as American Depositary Receipts (ADRs). Deutsche Telecom lists the ADR shares on its website and fully backs these shares trading in the United States.

The company's shares traded normally on the NYSE until June 2010, when the management chose to switch to an over-the-counter (OTC) listing. Investors interested in the OTC version (which has a different ticker than the ADR) may want to call their broker before trading.

AT&T merger

In March 2011, Deutsche Telecom and AT&T (T) reached an agreement for AT&T to purchase the U.S. operations of T-Mobile for $39 billion. When and if the deal is completed, Deutsche Telecom is to receive $25 billion in cash and the balance in AT&T stock.

As of November 2011, the deal is still waiting to clear U.S. antitrust review, a process which could take until mid-2012. Deutsche Telecom has a current market cap of $53 billion, so the completion of this deal will completely restructure the overall value of the company.

The current results from the German company are flat to slightly declining revenues and net profits. Investors waiting for a turnaround or the AT&T deal to be completed will earn the current attractive dividend, paid once a year in May. For U.S. investors, the dividend is in the 90 cents to $1 range, depending on conversion rate, which gives the ADR shares an 8 percent yield.

Recently the analysts at Goldman Sachs upgraded their rating on Deutsche Telecom to neutral from a sell rating.

The company next reports on Feb. 25.

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German company Deutsche Telecom (DT) is the largest mobile communications provider in Europe and owns the T-Mobile cellular service in the United States. The stock currently sports a high dividend yield, but investors should be wary of the gloom in the European economy....
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2011-57-05
Monday, 05 Dec 2011 01:57 PM
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