According to a recent Fidelity Viewpoints communication, “It’s been 9 months since the launch of the US market’s newest sector: communication services. This sector has outpaced the broad market thus far in 2019, gaining 19%.” What is so “new” about this? Well, some investments that used to be in a different sector were moved to this new category. Unfortunately, that has created a real messy type of investment, in my opinion. For example, an ETF that tracks this sector is “iShares U.S. Telecommunications ETF” with a ticker symbol of IYZ.
The top four holdings of IYZ are VZ (Verizon), CSCO, (Cisco Systems), ANET (Arista Networks) and T (AT&T). These make up more than half of the total investment in this fund. Let me submit that you should just buy the four stocks and not pay the 0.43% expense ratio and not deal with the 35% turnover ratio and get a far better growing dividend. VZ has a dividend yield of 4.36%. CSCO has a yield of 2.45%. ANET doesn’t pay a dividend, so I wouldn’t recommend it. T has a 5.96% dividend.
Furthermore, ANET and CSCO are technology companies. I wouldn’t classify them as communications companies in the same way that VZ and T are. I own shares of CSCO, VZ and T.