Telecommunications is a necessary utility and its need in both rural and urban areas as well as its role in the infrastructural development of an economy is of utmost importance. The U.S. telecom industry has developed into an intensely contested space where success largely depends on technical superiority, quality of services and scalability.

Thus, in order to stay abreast, existing players need to introduce innovative products or merge with other companies despite strict vigil by regulator Federal Communications Commission (FCC).

Momentum to Continue

The U.S. telecommunications industry is presently riding the growth trajectory and the momentum is likely to continue in 2015 as well. Telecommunications is one of the few industries to have seen rapid technological improvement even during recession. Owing to the significance of telecommunications as an infrastructure product, we expect the overall economic dynamics to shift in the industry’s favor.

The rising demand for technologically superior products has been the silver lining for the telecommunication industry in an otherwise tough environment. Uninterrupted advancement in telecom technologies has helped telecom operators to adopt newer business models in order to boost revenues. These include new pricing plans, a shift from unlimited data to tier-based data usage plans, and higher upgrade fees for smartphones and tablets.

In fact, the average revenue per user (ARPU) for most telecom carriers has been on the rise over the last two years. It is also expected to grow over the long term on the back of massive growth in mobile data usage.

Our Choices

While the telecom growth momentum is expected to be maintained in the U.S. over the near term, the major impetus is likely to come from the emerging markets of Asia-Pacific and the Latin American region. At this stage, we believe investors should choose stocks which promise strong dividend yield and carry a favorable Zacks Rank to cash in on future growth.

The choices could be narrowed down based upon a favorable Zacks Rank #1 (Strong Buy) or #2 (Buy) and promising value metrics (Value Score of ’A’ or ‘B’). The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or #2, offer the best upside potential.

Based upon the above criteria, we have selected three stocks that could be promising picks. Not only do these stocks flaunt a favorable Zacks Rank and offer high yield, they also boast a Value Style Score of ‘A’ or ‘B.’

Verizon Communications Inc. (VZ -Analyst Report): The company offers communication services in the form of local phone service, long distance, wireless and data services. Verizon is one of the world's leading providers of high-growth communication services.

Verizon currently has a Zacks Rank #2 (Buy) coupled with a favorable Value Style Score of ‘A.’ The company’s dividend yield is pegged at 4.45%. Also, adding to the positives, the company has performed well on the earnings front over the last one year. Verizon has surpassed the Zacks Consensus Estimate in the three of the last four quarters, with an average earnings beat of 1.31%. The stock has gained about 5.7% year to date (YTD). Notably, Verizon’s current year growth estimate is poised at 14.56%.

BCE Inc. (BCE - Analyst Report): Positioned as Canada’s largest communications service provider, BCE serves as the holding company for Bell Canada.

The Zacks Rank #2 company’s wireless segment is expected to benefit from its postpaid business which continues to enjoy solid subscriber addition. The company has a dividend yield of 4.75% and a Value Style Score of ‘B.’

Significant investments in network coverage, customer retention, attractive data plans and new handsets along with the provision of net protection will drive customer gain. As of Mar 31, 2015, the company had 7,145,420 postpaid subscribers, up 4.6% year over year.

TELUS Corp. (TU - Analyst Report): TELUS enjoys the position of the largest telecommunications company in Western Canada and the second largest in the country.

Carrying a Zacks Rank #2 and a Value Style Score of ‘B,’ TELUS continues to benefit from its strong wireless subscriber base, increased smartphone penetration, improving churn (customer switch), higher average revenue per unit, accelerating wireless data services and expanding wireline fiber optic networks. The company has a dividend yield of 3.76%. The company’s current year growth estimate is pegged at 11.74%.

Nippon Telegraph and Telephone Corp. (NTT - Snapshot Report): Japanese telecommunications company, Nippon Telegraph & Telephone provides a variety of telecommunications services, including telephone, telegraph, leased circuits, data communication, terminal equipment sales and other services.

The company has a dividend yield of 1.91% and a Value Style Score of ‘A.’ The company’s shares have rallied more than 35% year to date (YTD). Its current year growth estimate is pegged at 10.05%.