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I am not a financial advisor. This post is to provide information and not provide financial product advice. I discuss why I personally chose to invest in a stock, ETF, ETNs, CEF, REIT, investment fund or cryptocurrency (which I have held for over a week) and also share information that is public about the following stock, ETF, ETN, CEF, REIT, investment fund or cryptocurrency and they are based on my own personal opinion.
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When it comes to sector-based ETFs, I believe in the saying “shop around”.
When it comes to sector-based ETF’s, SPDR and Vanguard Sector Based ETFs are no doubt popular. But because prices can be quite expensive, those looking for value, good dividends and a high rating, will need to look into other companies such Blackstone’s iShares, Invesco ETFs or Fidelity’s ETF’s, to name a few, as I know there many other companies who also sell sector-based ETFs.
Now, I’m going to blog about ETFs in the Communications Sector.
Of all the sectors I invest in, the Communications Sector is my weakest.
I invest in AT&T (T) and Verizon (VZ) but to be truthful, there aren’t many communications sector stocks that excite me and those that do, are simply too expensive for my taste.
Facebook, Alphabet (Google), Netlfix are communications companies that are priced over $350 per share. I like Disney, but I’m waiting for a return of their dividend. While Comcast, Charter communications and T-Mobile US Inc., perhaps I’ll invest in someday.
So, to compensate my weakness in the communications portfolio, I invest in a sector-based ETF, in this case a Communications ETF (which holds all major companies) in a basket.
According to Morningstar:
Specialty-communications funds concentrate on telecommunications and media companies of various kinds. Most buy some combination of cable television, wireless-communications, and communications-equipment firms as well as traditional phone companies. A few favor entertainment firms, mainly broadcasters, film studios, publishers, and on-line service providers.
But all ETFs are not equal.
As of June 23rd closing:
Vanguard Communication Services Index Fund ETF Shares (VOX): $142.08. Gross Expense Ratio is .10% and a quarterly dividend which paid $.23 on on June 24th.
iShares U.S. Telecommunications ETF (IYZ): $33.15. Gross Expense Ratio is .42% and a quarterly dividend which paid .20 on June 16th.
SPDR S&P Telecom ETF (XTL): $102.60. Gross Expense Ratio is .35% and their last dividend paid was $.17 on June 24th.
Communications Services Select Sector SPDR Fund (XLC) – $79.80. Gross Expense Ratio is .12% and their last dividend paid was $.14 on June 24th.
Invesco S&P 500 Equal Weight Communication Services ETF (EWCO) – $38.62. Gross Expense Ratio is .40% and their last dividend was paid of $.08 was paid on June 30th.
John Hancock Multifactor Media and Communications Services ETF (JHCS) – $38.58. Gross Expense Ratio is 1.13% and their last dividend of $.15 was last paid on December 30th.
and there Fidelity MSCI Telecommunication Services Index ETF (FCOM) – $53.83. Gross Expense Ratio is .08% and their last dividend of $.08 was paid on June 23rd.
So, why did I choose FCOM? Vanguard and SPDR were a bit more expensive, SPDR, Invesco, John Hancock and iShares are over .25% in Gross Expense Ratio. Fidelity’s FCOM Gross Expense Ratio is .08%
The largest in Distribution Yield was iShares U.S. Telecommunications ETF (IYZ) with 2.44% while everyone else was under 1%.
I saw Fidelity MSCI Telecommunication Services Index ETF (FCOM) with a distribution yield of .57% and had the lowest Gross Expense Ratio than any of the others. It’s also affordable at $53.83.
I wanted to get the best return with less fees.
Morningstar rated FCOM with an overall rating of 4 stars, also four stars in three years and also five years.
And I like the fact that it offers Facebook, Alphabet, Disney, Comcast, Netflix, Verizon, AT&T, Charter and T-Mobile which is a plus.
It’s top heavy with Facebook and Alphabet, two stocks that don’t pay dividends (but are great when it comes to capital appreciation) and make up over 38% of the ETF, so you are going to get a lower dividend, but I call it a balance of growth/dividend. And FCOM outperformed the S&P 500 over the past year by 12%.
With a total assets of $785.6 million, 112 holdings (all US-based) and being an ETF since October 2013.
So, FCOM is not exactly for those who are looking for great dividends. Look at it more as a tool to strengthen your investments in the Communication Sectors. More for growth, but you do get paid a dividend!
Since I’m already invested in Verizon (VZ) and for now invested in AT&T (despite the company will be cutting their dividend next year), it does give me exposure to other companies that I don’t invest in that offer solid growth.
Yes, I’m a dividend investor, but if you are going to be a sector-based investor who tries to play a balance of offense and defense in case of market volatility, I want to make sure that I have exposure to these popular communications growth companies that I don’t invest in.
