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2 High-Yield Tech Stocks to Buy in December

By Rich Duprey – Dec 22, 2021 at 6:33AM

Key Points

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These income stocks offer both high yields and the promise of capital appreciation.

Periods of high or runaway inflation like the one we're experiencing can be managed by buying dividend stocks. The asset managers at Hartford Funds found that since 1930, dividend-paying stocks have contributed 41% to the total return of the benchmark S&P 500

The Hartford Funds study also found that from 1970 on, dividends represented an amazing 84% of the index's total return. Reinvesting dividends in the benchmark, coupled with the power of compounding, would have turned a $10,000 investment into more than $3.8 million, compared to just $627,161 based on the index's price alone.

So which dividend stocks should you buy? Simply chasing yield is too risky, since a higher yield often carries higher risk -- but when a good business offers you an above-average return, it's worth investigating further.

People looking at mobile devices in a store

Image source: AT&T

1. AT&T

Telecom giant AT&T (T -0.81%) is the first high-yielding tech stock to consider -- it yields 8.8% annually, as its stock sunk to lows it hasn't seen in over a decade. While its high-growth days are long behind it, Ma Bell still has some catalysts ready to spring.

The near-term one is its spinoff of its WarnerMedia properties, which will be merged with Discovery (DISCA) (DISCK) to create a new publicly traded media company that will start with over 85 million streaming subscribers and a diverse content library. Discovery CEO David Zaslav believes it could eventually have as many as 400 million subscribers.

The second catalyst for AT&T is the rollout of 5G wireless infrastructure. It spent big bucks acquiring 5G midband spectrum earlier this year, and it expects its 5G-C network to cover 200 million people in the U.S. by the end of 2023, and its fiber footprint to grow to cover 30 million customers by the end of 2025.

AT&T will receive around $43 billion from the spinoff-merger deal, which it will use to pay down debt and enhance its 5G network. It's also going to halve the amount of money that it dedicates toward paying its dividend. While the cut is sharp, the telecom will still be making a hefty payout in the 4% to 5% range, well above the 1.3% average yield of the S&P 500. 

Smiling friends stand with their smartphones.

Image source: Getty Images

2. Verizon

Investors should keep their focus in the wireless field with Verizon Communications (VZ -1.14%), which naturally offers some of the same catalysts as AT&T. The rollout of 5G wireless infrastructure is not a one-time situation, but rather a rolling, multi-year upgrade cycle that provides Verizon with a unique opportunity to boost organic wireless growth sustainably as the upgrade cycle drives greater data consumption. 

It's been a decade since wireless download speeds were meaningfully improved, and because Verizon generates some of its best profit margins from data consumption, the cost of upgrading the infrastructure will pay off for years to come. Consumer wireless revenue accounted for $14 billion in the third quarter, up 4% year over year, while its consumer FiOS broadband service also rose 4% to $2.9 billion.

5G Home internet service is available in five dozen cities, while its fixed wireless access is available in 48 states. It plans to be in 30 million homes by 2023, and 50 million homes by 2025. 

Like AT&T, Verizon is carrying a lot of debt, and its stock has been weighed down by it. At just 10 times trailing earnings and next year's estimates, the telecom leader is also very cheap, while its yield of 4.7% will pay you to wait for the market to recognize its potential.

Rich Duprey owns AT&T. The Motley Fool recommends Discovery (C shares) and Verizon Communications. The Motley Fool has a disclosure policy.

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