Telecom stocks have been struggling in recent weeks as concerns about lead-covered cables and the potential liability for their cleanup has led to some significant selloffs. But it may be too early to raise flags around that risk and for investors now may be an opportune time to load up on telecom stocks as valuations are lower. Whether you’re looking to buy shares of AT&T (NYSE:T) or Verizon Communications (NYSE:VZ), you can get exposure to those and other stocks with the iShares U.S. Telecommunications ETF (CBOE: IYZ).
In addition to telecom stocks, the ETF also gives investors exposure to companies that provide products, services, and technologies related to telephone and internet. The two largest holdings in the fund are Cisco Systems (NASDAQ:CSCO) and Comcast (NASDAQ:CMCSA), which account for 18% and 16% of the ETF’s weight, respectively. The fund isn’t overly diversified as it contains only 20 stocks within the fund.
At 0.39%, the ETF’s expense ratio is a bit high given the lack of diversification but it isn’t terribly expensive overall; on a $10,000 investment, the ETF would cost you $39 in fees.
Year to date, the ETF is down 0.9% and over the past five years it has declined by close to 20%, with the bulk of its losses coming over the past year. But when including the dividends that it pays, the ETF’s total returns are a negative 9%. While that’s not great, it’s a bit more modest when you include the payouts. And in the long run, the stocks within the fund should recover, making now a potentially attractive time to invest in the iShares U.S. Telecommunications ETF.
