Critical Comparison: Chunghwa Telecom (NYSE:CHT) and KT (NYSE:KT)

Chunghwa Telecom (NYSE:CHT) and KT (NYSE:KT) are both communication services companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, risk, valuation, dividends and analyst recommendations.

Insider and Institutional Ownership

2.1% of Chunghwa Telecom shares are held by institutional investors. Comparatively, 18.9% of KT shares are held by institutional investors. 1.0% of Chunghwa Telecom shares are held by company insiders. Comparatively, 1.0% of KT shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Chunghwa Telecom and KT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Chunghwa Telecom	16.11%	10.00%	7.36%
KT	4.72%	6.45%	2.93%

Analyst Ratings

This is a breakdown of recent ratings and price targets for Chunghwa Telecom and KT, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Chunghwa Telecom	0	2	0	0	2.00
KT	0	3	0	0	2.00

KT has a consensus target price of $23.08, indicating a potential upside of 22.14%. Given KT’s higher probable upside, analysts clearly believe KT is more favorable than Chunghwa Telecom.

Volatility and Risk

Chunghwa Telecom has a beta of 0.27, meaning that its stock price is 73% less volatile than the S&P 500. Comparatively, KT has a beta of 0.56, meaning that its stock price is 44% less volatile than the S&P 500.

Earnings & Valuation

This table compares Chunghwa Telecom and KT”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Chunghwa Telecom	$7.58 billion	4.72	$1.23 billion	$1.65	27.97
KT	$19.88 billion	0.46	$1.20 billion	$1.86	10.16

Chunghwa Telecom has higher earnings, but lower revenue than KT. KT is trading at a lower price-to-earnings ratio than Chunghwa Telecom, indicating that it is currently the more affordable of the two stocks.

Dividends

Chunghwa Telecom pays an annual dividend of $1.25 per share and has a dividend yield of 2.7%. KT pays an annual dividend of $1.04 per share and has a dividend yield of 5.5%. Chunghwa Telecom pays out 75.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KT pays out 55.9% of its earnings in the form of a dividend. KT is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

KT beats Chunghwa Telecom on 7 of the 13 factors compared between the two stocks.

About Chunghwa Telecom

Chunghwa Telecom Co., Ltd., together with its subsidiaries, provides telecommunication services in Taiwan and internationally. It operates through Consumer Business, Enterprise Business, International Business, and Others segments. The company offers local, domestic long distance, and international long distance fixed-line telephone services; mobile services such as prepaid and postpaid plans; broadband plans; and internet and data services. Chunghwa Telecom Co., Ltd. was incorporated in 1996 and is headquartered in Taipei City, Taiwan.

About KT

KT Corporation provides integrated telecommunications and platform services in Korea and internationally. The company offers mobile voice and data telecommunications services based on 5G, 4G LTE and 3G W-CDMA technology; fixed-line telephone services, including local, domestic long-distance, international long-distance, and voice over Internet protocol telephone services, as well as interconnection services; broadband Internet access service and other Internet-related services; and data communication services, such as fixed-line and leased line services, as well as broadband Internet connection services. It also provides media and content services, including IPTV, satellite TV, digital music, e-commerce, online advertising consulting, and web comics and novels services; and credit card processing and other financial services. In addition, the company offers information technology and network services, and satellite services; sells handsets and miscellaneous telecommunications equipment; develops and sells residential units and commercial real estate; and rents real estate properties. Further, it maintains public telephones; offers security, B2C and B2B, investment fund, software development and data processing, value added network, call center, system integration and maintenance, marketing, PCS distribution, truck transportation and trucking arrangement business, cloud system implementation, satellite communication network, installation and management, and data center development and related services. Additionally, the company is involved in the Internet banking ASP and security solutions, residential building development and supply, sports team management, technology business finance, and submarine cable construction and maintenance businesses. The company was formerly known as Korea Telecom Corp. and changed its name to KT Corporation in March 2002. KT Corporation was founded in 1981 and is headquartered in Seongnam-si, South Korea.