Critical Analysis: Bezeq The Israel Telecommunication (OTCMKTS:BZQIY) vs. Telefonica Brasil (NYSE:VIV)

Bezeq The Israel Telecommunication (OTCMKTS:BZQIY) and Telefonica Brasil (NYSE:VIV) are both communication services companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, analyst recommendations, risk, valuation, institutional ownership, profitability and dividends.

Dividends

Bezeq The Israel Telecommunication pays an annual dividend of $2.36 per share and has a dividend yield of 21.0%. Telefonica Brasil pays an annual dividend of $0.61 per share and has a dividend yield of 4.7%. Bezeq The Israel Telecommunication pays out 62.8% of its earnings in the form of a dividend. Telefonica Brasil pays out 78.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Bezeq The Israel Telecommunication is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent ratings for Bezeq The Israel Telecommunication and Telefonica Brasil, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bezeq The Israel Telecommunication	0	0	0	0	0.00
Telefonica Brasil	4	6	1	0	1.73

Telefonica Brasil has a consensus price target of $14.26, indicating a potential upside of 10.44%. Given Telefonica Brasil’s stronger consensus rating and higher probable upside, analysts clearly believe Telefonica Brasil is more favorable than Bezeq The Israel Telecommunication.

Profitability

This table compares Bezeq The Israel Telecommunication and Telefonica Brasil’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bezeq The Israel Telecommunication	N/A	N/A	N/A
Telefonica Brasil	10.64%	9.72%	5.18%

Earnings and Valuation

This table compares Bezeq The Israel Telecommunication and Telefonica Brasil”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bezeq The Israel Telecommunication	N/A	N/A	N/A	$3.75	3.00
Telefonica Brasil	$10.67 billion	1.97	$1.10 billion	$0.78	16.55

Telefonica Brasil has higher revenue and earnings than Bezeq The Israel Telecommunication. Bezeq The Israel Telecommunication is trading at a lower price-to-earnings ratio than Telefonica Brasil, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

0.2% of Bezeq The Israel Telecommunication shares are owned by institutional investors. Comparatively, 5.2% of Telefonica Brasil shares are owned by institutional investors. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

Telefonica Brasil beats Bezeq The Israel Telecommunication on 9 of the 12 factors compared between the two stocks.

About Bezeq The Israel Telecommunication

Bezeq The Israel Telecommunication Corp. Ltd provides communications services to business and private customers in Israel. It operates through Domestic fixed-line communications, Cellular Communication, Internet, International Communication, and ICT Solutions, and Multi-Channel Television segments. The company offers telephony services, including basic telephony services on the household telephone line, as well as associated services, such as voice mail and caller ID; national numbering services; and transmission and data-communication services. In addition, it provides virtual server services; Bcyber services; smart business services; private virtual PBX services; and B144 service, an advertising platform for digital advertising and marketing to small businesses, BCam, Wi-Fi, SMS, and remote backup. Further, the company offers infrastructure services, company's network connection, billing services, and space leasing; and operates and maintains radio transmitters for broadcasting of radio and television contents. Additionally, it provides basic telephone, browsing and data communications, messaging, push to talk, Internet of Things, and servicing and repair services, as well as sells terminal equipment. Furthermore, the company provides cellular communication services; multi-channel digital satellite television, over the Internet, and value added services. The company was founded in 1980 and is based in Holon, Israel.

About Telefonica Brasil

Telefônica Brasil S.A., together with its subsidiaries, operates as a mobile telecommunications company in Brazil. Its fixed line services portfolio includes local, domestic long-distance, and international long-distance calls; and mobile portfolio comprises voice and broadband internet access through 3G, 4G, 4.5G, and 5G, as well as mobile value-added and wireless roaming services. The company also offers data services, including broadband and mobile data services. In addition, it provides pay TV services through IPTV technologies; network services, such as rental of facilities; other services comprising internet access, private network connectivity, computer equipment leasing, extended service, caller identification, voice mail, cellular blocker, and others; wholesale services, including interconnection services to users of other network providers; and digital services, such as entertainment, cloud, and security and financial services. Further, the company offers multimedia communication services, which include audio, data, voice and other sounds, images, texts, and other information, as well as sells devices, such as smartphones, broadband USB modems, and other devices. Additionally, it provides telecommunications solutions and IT support to various industries, such as retail, manufacturing, services, financial institutions, government, etc. It markets and sells its solutions through own stores, dealers, retail and distribution channels, door-to-door sales, and outbound tele sales. The company was formerly known as Telecomunicações de São Paulo S.A. – TELESP and changed its name to Telefônica Brasil S.A. in October 2011. The company was incorporated in 1998 and is headquartered in São Paulo, Brazil.