Telecom shares have kicked off the year strongly — and they remain relatively inexpensive

Telecom Stocks Shine as Value Investments in 2026

This year has proven to be highly rewarding for investors in Verizon and AT&T, with both companies still offering compelling value opportunities when considering their price-to-earnings ratios, dividend payouts, and projected free cash flow yields.

Correction Notice

A previous version of this article contained an error regarding T-Mobile’s year-to-date stock performance.

Value Investing Boosts Telecom Sector

The telecommunications sector has benefited from a renewed interest in value stocks, with leading companies in the industry outperforming the broader market so far this year.

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Telecom Stocks Outperform the Market

While the S&P 500 has slipped by 1.5% in 2026, Verizon’s shares have surged 25.5%. AT&T has climbed 15.3%, and T-Mobile US has gained 9.1%. (All figures are as of Friday and do not include dividends.)

Cable companies like Charter Communications and Comcast, which previously struggled due to competition in the home internet market, have also rebounded with gains of 11.3% and 14% respectively this year, after suffering double-digit losses last year.

Telecom Stocks Remain Undervalued

Except for T-Mobile, the main telecom stocks are still considered undervalued. Verizon and AT&T are among the cheapest stocks in the S&P 500 communications-services sector when looking at forward price-to-earnings ratios, which are based on consensus analyst estimates for the next 12 months and weighted by market capitalization.

Verizon, Charter, and Comcast all trade at forward P/E ratios that are less than half of the sector average (21.4) and the overall S&P 500 (21.8). AT&T’s forward P/E is slightly higher at 12.2.

T-Mobile US is priced at a forward P/E of 20.2, reflecting expectations for faster revenue growth compared to Verizon and AT&T. In 2024, T-Mobile held a 35% share of the U.S. wireless market, followed by Verizon at 34% and AT&T at 27%, according to the latest data from TeleGeography (April update).

Value Stocks Lead the Way

The strong performance of telecom stocks aligns with a broader trend favoring value investments. The Russell 3000 Value Index is up 3.3% this year, while the Russell 3000 Growth Index has fallen 5.5%, according to LSEG.

Industry Dynamics and Company Strategies

Investors appear to have accepted the competitive landscape among wireless providers. Concerns last year about Verizon’s growth ambitions under new CEO Dan Schulman have eased, especially after the company reported 616,000 net postpaid phone additions in the fourth quarter—its best result since 2019. This strong showing did not unsettle investors.

According to Citi analyst Michael Rollins, while Verizon’s aggressive growth targets could raise questions about future financial risks for competitors, much of this concern is already reflected in current stock prices.

AT&T has benefited from a long-term effort to simplify its business, shedding media assets and focusing on telecommunications. Investments in fiber connectivity have enabled AT&T to offer more bundled services, which has helped retain customers. The company is also expanding its wireless broadband capabilities, including a $23 billion deal to acquire spectrum licenses from EchoStar, expected to close in mid-2026. As of the fourth quarter, over 40% of AT&T’s fiber customers also subscribed to its wireless services.

T-Mobile has attracted investors by prioritizing returns to shareholders. CFO Peter Osvaldik told MarketWatch in February that the company has ample capacity to invest in its network and return cash to shareholders through dividends and buybacks over the next two years.

Impact on Cable Providers

The major wireless companies’ investments in home internet—via fiber or fixed wireless—have increased competition for cable providers. Comcast and Charter have lost broadband subscribers as a result. However, the negative sentiment may be easing. Charter, for example, lost fewer broadband customers in the fourth quarter than expected and even grew its video subscriber base, reversing a long-term decline. Analyst Craig Moffett of MoffettNathanson credited Charter’s turnaround to its bundled streaming packages.

Comcast, which operates across media, theme parks, and streaming, is also showing signs of stabilizing. Wolfe Research’s Peter Supino noted after the company’s fourth-quarter results that Comcast’s performance appears to be bottoming out, though he criticized management for not addressing the challenges of its conglomerate structure. This, he argued, has led investors to undervalue certain business segments, such as NBCUniversal.

Analyzing the S&P 500 Communications Sector

The S&P 500 communications-services sector consists of just 20 companies, including tech giants Alphabet and Meta Platforms, which together account for 38% of the State Street Communication Services Select Sector SPDR ETF (XLC). Adding Netflix brings the total to nearly 44% of the ETF’s holdings.

Below is a table listing all 20 companies in the sector, ranked by forward P/E ratio, along with their dividend yields and forward free-cash-flow yields.

Company	Forward P/E	Dividend Yield	Forward FCF Yield	FCF Headroom
Charter Communications CHTR	5.1	0.00%	15.85%	15.85%
Omnicom Group OMC	7.4	3.77%	14.13%	10.36%
Comcast CMCSA	8.4	4.14%	12.59%	8.46%
Verizon Communications VZ	10.2	5.54%	9.84%	4.31%
Fox (Class A) FOXA	10.8	1.03%	8.49%	7.46%
Match Group MTCH	11.0	2.63%	15.10%	12.47%
AT&T T	12.2	3.88%	9.09%	5.22%
Trade Desk TTD	13.6	0.00%	6.38%	6.38%
Walt Disney DIS	14.4	1.48%	6.11%	4.64%
Paramount Skydance – Class B PSKY	14.9	1.67%	-1.27%	-2.94%
T-Mobile US TMUS	20.2	1.84%	7.48%	5.64%
Meta Platforms META	20.8	0.33%	0.43%	0.10%
Electronic Arts EA	21.1	0.38%	4.51%	4.12%
News Corp (Class A) NWSA	23.3	0.72%	4.65%	3.93%
Alphabet GOOGL	25.0	0.28%	1.02%	0.74%
Take-Two Interactive Software TTWO	25.7	0.00%	3.35%	3.35%
Netflix NFLX	29.9	0.00%	2.78%	2.78%
TKO Group Holdings TKO	35.2	1.54%	2.80%	1.26%
Live Nation Entertainment LYV	88.1	0.00%	3.66%	3.66%
Warner Bros. Discovery WBD	–	0.00%	6.37%	6.37%
Source: LSEG

Understanding Free Cash Flow and Dividend Safety

Free cash flow (FCF) represents the cash a company has left after capital expenditures, which can be used for expansion, acquisitions, dividends, share buybacks, or other corporate needs.

The forward FCF yields above are calculated using current share prices and analyst estimates for 2026. Comparing FCF yields to dividend yields helps assess whether there is a cushion above the dividend, indicating both the sustainability of current payouts and the potential for additional shareholder returns.

Highlights from the Sector

• Charter leads with the lowest forward P/E and the highest FCF yield, making it attractive for value-focused investors, even in a sector often seen as declining.
• Omnicom offers a low P/E and a solid 3.77% dividend yield, well-supported by a 14.13% FCF yield. For comparison, the S&P 500’s weighted dividend yield is just 1.16%, and bonds lack the long-term growth potential of stocks.
• Comcast’s 4.14% dividend yield is also strongly backed by its expected FCF per share.
• Verizon boasts the highest dividend yield on the list at 5.54%, with a FCF yield providing a 4.31% buffer.
• AT&T, though pricier at a 12.2 forward P/E, still offers a relatively low valuation and a well-supported 3.88% dividend yield. The company expects its capital spending to remain within previously announced guidance, even after the EchoStar deal, with free cash flow for 2025 totaling $15.25 billion.
• Warner Bros. Discovery is at the bottom, with no forward P/E due to expected losses in 2026. However, Paramount Skydance plans to acquire WBD later this year.

Final Thoughts for Investors

Investing in individual stocks requires careful consideration. If any of these companies catch your eye, be sure to conduct your own research to evaluate their long-term competitiveness. You can start by exploring more details through their ticker symbols.

Further Reading

• Tomi Kilgore’s comprehensive guide to using the MarketWatch quote page
• Seven REIT stocks pass a strict financial screen, with dividends as high as 6.27%

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