Yield-Seeking Investors Turn to Phone Stocks

Willing to give up the prospect of faster earnings growth for the current income offered by dividends, investors are driving the biggest rally for telephone stocks in seven years. Verizon Communications and Hong Kong-based PCCW have led a 21% gain in MSCI's gauge of 52 global telecommunications companies since the end of the second quarter of 2010, even as analysts estimate that the group's earnings will grow at less than half the pace of the MSCI World Index of stocks in 24 developed nations, data compiled by Bloomberg show. Telephone companies, long known for generous yields, account for five of the 10 largest payouts in the S&P 500 and yield 5.4% on average. Investors are snapping up dividend stocks despite the uncertainty over taxes: Reductions in levies on capital gains and dividends enacted in 2003 will expire on Dec 31, 2010 unless Congress extends them.