Market Wrap-up for Nov. 12 - Net Neutrality and Dividend Stocks

Market Wrap-up for Nov. 12 – Net Neutrality and Dividend Stocks


Over the past few days and weeks, you have more than likely heard of something called “net neutrality,” as discussions have spanned from consumers to Wall Street and now even President Barack Obama. The issue involves the internet and how it is consumed, but also how it is offered by companies across the United States. Many of these firms happen to be major dividend stocks that have a big stake in how this whole scenario plays out.

What Is Net Neutrality?

In a nutshell, net neutrality is the principle that all data offered on the internet should be treated as equal and there should be no discriminatory charges for types of content, speeds, users and more. Basically, net neutrality is the way the internet works now; open for anyone without any kind of extra charge for what you do online and how you consume your internet services.

What cable companies have proposed is different charges for consumers based on what they are doing on the internet. This could include premium charges for streaming services like Youtube and Netflix, and also what many are calling a “fast lane.” Of course, if companies like Netflix and Google are charged more by cable providers to display their content, those upcharges will likely be passed on to the consumer, meaning more money out of your pocket.

Net Neutrality

Ending net neutrality could allow major internet providers to price out competition with tiered services, and ultimately force consumers to pay more for certain activities. In a nutshell, ending net neutrality is a plus for major internet providers as they will likely increase their revenues and control, but a negative for consumers who will have to pay more for the  internet services they have been using for years.

You can learn more about this issue by clicking here.

How Net Neutrality Impacts Investors

You may have noticed a big dip in internet service providers on Monday, as stocks like Comcast (CMCSA) took a dive after President Barack Obama argued that net neutrality should be preserved and the internet should be classified as a public utility. The allure of ending net neutrality for investors is likely found in these providers, as their stocks would likely climb based on higher revenues (and the news alone).

Over the long term, if net neutrality is preserved it will likely have zero impact on these stocks, as they will endure a short-term sell-off; however, if it is ended, the long-term may see a nice jump in these stocks. If you are someone who thinks that there is a high possibility of net neutrality ending, you can hedge yourself by investing in these stocks. Keep in mind that if the proposed changes do not go through and net neutrality is preserved, internet provider stocks will likely be in for a short-term pullback.

Accordingly, investors should keep their eyes on the news over the next few weeks and stay on top of any developments concerning this national issue.

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