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Author: kelbon Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 41629  
Subject: Re: Portugal Telecom Date: 1/10/2013 11:29 AM
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This seems like a high risk/high reward situation. The investment premise here is not that this is a great company with a proven track record of consistently increasing earnings year after year, but rather that the stock appears to be very cheap.

In my experience, much more often than not, if a stock is paying an outsize dividend then take a pass. Usually the dividend payments aren't sustainable and they are cut. Consequently the share price heads south. For the last two years PT's dividend pay-outs have been more than twice their free cashflow each year. This can't go on indefinitely.

There's a lot of competition in the telecom arena. Portugal Telecom has seen increasing competition from Vodafone. I don't think anyone knows with any certainty how protracted Europe's economic woes will be, or whether things will get worse before they get better. Also, Brazil's economy isn't quite as robust as it was.

I think this stock a bit of a gamble, especially in the short term, but there's the possibility that the payoff might be more than satisfactory eventually.

kelbon
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