Telefonica S.A. (ADR) (NYSE:TEF)

CAPS Rating: 4 out of 5

A telecommunications group that provides a range of services in Spain and Latin America. Provider of fixed-line public voice telephone services, wireless communications services, Internet access services and data transmission services.

Recs

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Player Avatar Gouldberg (84.49) Submitted: 7/9/2012 7:09:25 AM : Outperform Start Price: $11.19 TEF Score: -11.98

If you think Spain will find a way through it's debt crisis, TEF looks to be a good way to bet on the recovery. I liked it at $18, love it at $12. The double-digit dividend compensates you for some of the risk. Free cash flow looks solid. ROE for the last three years was about 30%. To keep the dividend sustainable, they have begun to pay out a portion of the dividend in shares (while still paying a portion in cash). There is speculation they will sell their German operations to help pay down their debt.Oh, and 50% of earnings come from Latin America, which helps de-emphasize the European risk a bit, too.

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