With the markets off to the races lately, many investors have once again begun shifting their portfolios toward growth. "Stodgier" and low beta funds such as the PowerShares S&P 500 Low Volatility ETF (ARCA:SPLV) have been cast aside in favor of faster-moving options. By blindly shifting into strict growth sectors, however, investors may be missing out on some prime opportunities.

One of those opportunities is in the wireless and telecom sector.

As smartphone and tablet adoption has been taking place rapidly, wireless providers are transforming themselves into supreme growth stocks - all while paying above-average dividends. Investors may want to give telecommunications stocks a ring.

SEE: A Primer On Investing In The Tech Industry

It's All About Data
At this point, it's no secret that mobile devices have become an integral part of many people's lives. The adoption of smartphones, tablet PCs and e-readers has grown rapidly, and by the end of 2012, the vast majority of American cellular phones were smartphones. That global usage of all those mini-computers, which combine various social networking, gaming and business functions, is causing a very profitable problem for the major wireless carriers - a major increase in data transmissions.

According to analysts at Fidelity, since 2007 the average revenue per unit (ARPU) of data for the four largest U.S. carriers grew from $9.50 to almost $27. That's a compound annual growth rate (CAGR) of nearly 23%. That increased wireless data consumption has become the lifeblood of the industry and has been the major driver of wireless revenues over the last 10 years.

That data consumption and smartphone adoption - along with high-speed video, digital cable services and mobile commerce - has firmly positioned the telecom sector as a potential growth engine for a portfolio. While traditional landline communication continues to shrink, these high-tech businesses are more than making up for any lost landline revenue. They will continue to do so as more consumers crave data-heavy devices.

This growth element of data-driven services doesn't even take into account the sector's other big appeal - it's a dividend paradise for investors. Firms within the sector are able to create steady revenue streams by locking subscribers into multi-year contracts. This allows the telecoms to project their future earnings with more accuracy and provide better profit potential. For income seekers, this translates into some of the highest dividend yields around. For example, CenturyLink (NYSE:CTL) yields a whopping 7.2%.

SEE: What You Need To Know About Mobile Patent Wars

Betting on Telecom Portfolio Growth
With the telecom sector offering high growth potential and high dividends, investors should consider adding these companies to a portfolio. For a cheap 0.46% in expenses, the iShares Dow Jones US Telecom (ARCA:IYZ) is the largest, in terms of assets, and most liquid way to add the sector to a portfolio. The ETF tracks 26 of the largest telecom firms including AT&T (NYSE:T) and United States Cellular (NYSE:USM). The fund yields a juicy 3.04%. Likewise, the Vanguard Telecom Services ETF (ARCA:VOX) can be used for broad telecom sector exposure. VOX yields 3.53%.

One of the best ways to play the wireless sector's growth is through the various tower operators. Believe it or not, the bulk of the numerous cellular towers that dot our countryside aren't owned by network providers such as Verizon Communications (NYSE:VZ). Ownership of these falls to firms such as American Tower (NYSE:AMT). AMT recently converted into a Real Estate Investment Trust (REIT), which provides big dividends for shareholders. The company's approximately 50,000 owned cellular towers across the globe kick off some hefty cash flows. That cash flows back to investors in the form of a growing 1.2% dividend and strong capital appreciation of shares.

Also catching the REIT bug is AMT rival Crown Castle International (NYSE:CCI). While not fully converted yet, the firm has taken the first step and begun reporting FFO metrics with its quarterly earnings announcements. Analysts predict that it's only a matter of time before the company converts. That could lead to growing dividends as well.

SEE: Cell Phone Evolution

The Bottom Line
With the markets swooning once again, some traditional steady-eddy sectors have been left behind. However, nothing is traditional about the telecom sector. Rising data consumption and smartphone adoption are providing a hefty dose of growth, while the sector's big dividends churn out juicy income. For investors, it offers a great portfolio play. The preceding picks, along with the SPDR S&P Telecom (ARCA:XTL), make ideal selections to play the sector.

At the time of writing, Aaron Levitt did not own any shares in any company mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    Top Three Transportation ETFs

    These three transportation funds attract the majority of sector volume.
  2. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  3. Investing Basics

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  4. Stock Analysis

    The Biggest Risks of Investing in Amazon Stock

    Find out which risks are most important to Amazon's shareholders. Learn which operational risks impact share prices and which financial risks affect investors.
  5. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  6. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  7. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  8. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  9. Mutual Funds & ETFs

    Top 4 Investment Grade Corporate Bonds ETFs

    Discover detailed analysis and information about some of the top exchange-traded funds (ETFs) that offer exposure to the investment-grade corporate bond market.
  10. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!