You may have noticed increased broadband costs recently. Many ISP stocks adjust prices annually based on inflation rates like the Consumer Price Index (CPI) or Retail Price Index (RPI). Companies pass these costs on to consumers to maintain their profit margins.
Additionally, the growing reliance on high-speed internet for remote work, online entertainment and e-commerce has created sustained demand for ISP stocks. ISPs are then well-positioned to capitalize on this ongoing need.
The good thing about investing in these companies is that they are often large and stable and have a solid order book of recurring revenue with good profit margins. Some ISP stocks pay healthy dividends and have strong capital appreciation potential.
When inflation causes the price of these services to rise, it’s not uncommon for this to become the new price moving forward, even when inflation subsides.
So, to capitalize on these rising costs, here are three ISP stocks for investors to consider in April this year.
Verizon (VZ)
Verizon (NYSE:VZ) is one of the best companies to consider investing in for ISP stocks. This comes from its robust dividend yield of 6.69% and dividend growth rate of 1.92%.
Last year, the company reported a 3.2% increase in wireless service revenue, reaching $76.7 billion. However, total operating revenue fell by 2.1% to $134.0 billion.
Verizon expects its wireless service revenue to grow 2% to 3.5% next year. Adjusted EBITDA is projected to increase by 1% to 3%, and the company anticipates adjusted EPS to range from $4.50 to $4.70.
Over the past year, controversies such as using lead in copper cables, have hammered VZ’s stock price or kept its valuation muted. However, the stock reached the bottom in October last year and has since made a recovery. Due to its impressive yield and these fears largely subsiding, it’s on its way up again.
AT&T (T)
AT&T (NYSE:T) is another of the top ISP stocks to buy for investors looking to capitalize on the higher broadband costs.
From a dividend perspective, T could be in one of the strongest positions. It pays a 6.90% yield while its payout ratio is 56.35%. This compares favorably to VZ’s payout ratio, which is currently 96% at the time of writing.
At the time of writing, T has lost around 6.72% of its value year to date, and its shares are currently the cheapest all year at $16.09.
In 2024, T plans to continue its strategic growth, focusing on expanding its 5G and fiber networks, which drove robust results in 2023. The company has seen significant customer growth of its unlimited plans, which, along with broadband expansion, are expected to continue driving revenue and EBITDA growth. This could lead to higher dividends for investors in the future.
Comcast (CMCSA)
Comcast (NASDAQ:CMCSA) is one of those ISP stocks to consider for investors with more dividend growth focus. Its yield at 3.17% is significant, but its dividend growth rate of 7.27% and shareholder yield of 10.07% gives it an edge over T and VZ for a different type of investor, namely one with a long time horizon to grow their dividends.
CMCSA’s moderate dividend also means less capital erosion over the past five years compared to its peer group, which is around 10%. Over the past year, it has gained around 2% in capital gains.
Furthermore, CMCSA demonstrated solid performance in 2023, ending the year with a substantial net income and revenue increase. For the fourth quarter, revenue grew 2.3% year-over-year to $31.25 billion, with annual net income soaring by 186.5% to $15.38 billion.
CMCSA could, therefore, be one to watch for investors who want to play the long game.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.