Today we are going to take a look at the iShares Global Telecom Exchange Traded Fund (NYSE: IXP – $58.36). The fund seeks to track the S&P Global Telecommunications Services Sector Index and generally invests at least 90% of its assets in securities and depository receipts comprising the index. The investment has not done as well as I originally expected, gaining only 3.64% on the year, but provided a well-above average dividend yield of 3.92%, thereby returning 7.56% for investors over the past 52-weeks. Since entering the portfolio, it has gained nearly 11% over a seven-year stretch, with an annual total return of about 5.3%, clearly lagging the S&P 500. However, the shares are a safe-haven for investors, as the diversified portfolio of 39 telecommunication companies are virtually all large-cap players from around the world. The index is weighted by market capitalization, therefore U.S. companies like AT&T and Verizon top the list with a nearly 33% exposure. Asian and European companies comprise about 57% or the total.
Here are the top ten holdings and the breakdown by geographic region.
Looking ahead, there will probably be further consolidation in the industry, especially in the U.S. as merger and acquisition activity has been picking up. Price competition will continue to intensify, however, and I don’t think pricing for access will improve until one of the major carriers can offer something to consumers that is not easily repeatable by competitors. I am maintaining my 8% allocation exposure for income investors for now, as it represents a conservative and inexpensive way to capitalize on the growth of the worldwide telecom sector .