Telefonica -Update
The telecommunications-service sector will hardly create any meaningful growth in industrialized countries over the medium term; furthermore in EM (mainly in Latin America for TEF) only modest growth can be expected.
While Telefonica came under fundamental pressure in the aftermath of the financial crisis and the eurozone debt crisis, and because of important deleveraging and restructuring, balance-sheet concerns have largely dissipated over the past two years, and revenue growth appears to be bottoming out.
Positive growth trends in the first quarter have confirmed this thesis. While growth will arguably remain slow, Telefonica shares will continue to offer an attractive dividend yield – the dividend for 2015 and 2016 has already been set at 0.75 euro per share – which makes an investment worthwhile, notably for yield-conscious investors. The upside potential for Telefonica is important, a best-case scenario could result in an upside of over 30 %.