Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

May 4, 2011 - Telefonica, S.A. (TEF-NYSE) provides fixed and mobile telephony services primarily in Spain, rest of Europe, and Latin America. Its fixed telecommunication services include PSTN (public switched telephone network) lines; ISDN (integrated services digital network) accesses; public telephone; local, domestic, and international long distance and fixed-to-mobile communications; corporate communications; video telephony; supplementary and business-oriented value-added services; network services; leasing and sale of handset equipment; and telephony information services.

Its data and business-solutions services principally include leased lines; virtual private network services; fiber optics services; the provision of hosting and application; outsourcing and consultancy services; desktop services; and system integration and professional services.

The company's wholesale services for telecommunication operators primarily are domestic interconnection services; international wholesale services; leased lines for other operators' network deployment; local loop leasing under the unbundled local loop regulation framework; and bit stream services.

It also offers various mobile and related services and products that include mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and trunking and paging services. The company has a strategic alliance with China Unicom (Hong Kong) Limited. Telefonica, S.A. was founded in 1924 and is headquartered in Madrid, Spain.

While the company is seeing a slowdown in Spain where it gets 30% of its sales, other regions of the world are doing much better. The first is in Latin America where 42% of revenues originate. The star here is Brazil with its robust economy. TEF bought Portugal Telecom's share of Vivo to enter the market. Another region doing well: Europe, beyond Spain, has seen good demand for mobile, Internet, and data services.

With all of that positive momentum, analysts see earnings improving for the next two years. While eps (earnings per share) dipped to $2.43 in 2010 from $2.45 in 2009, 2 anlaysts see this year finishing at $2.63, then $2.75 in 2012. (The stock split 3 for 1 on January 20, 2011, and numbers are adjusted for that split.)

Expect stronger demand for the more advanced services, ones like mobile, broadband, and television. These should more than compensate for the slow to no growth of fixed network voice communications. In fact, analysts see revenues growing to $90 billion this year, more than 10% above last year's $81.38 billion.

Essential numbers: Market Cap is $116.73 billion. Trailing P/E is 10. Price to sales ratio is 1.26. Price to book value is 3.22. Book value is $8.03. Operating margin for the last 12 months was 20.68% and Profit margin was 16.31%. Return on equity was 36% and Return on assets was 6.77%. Total cash is $8.05 billion for $1.79 per share. Total debt is $90.49 billion. Total debt to equity is 193%. Current ratio is .63. Beta is .97. The stock is up 24.70% in the last year. There are 4.51 billion shares outstanding.

Even with all the bad publicity surrounding Spain's national fiscal problems, this telecom is doing very well, thanks to its international presence. Spain is only about 30% of revenues now, and the fast growing Latin American countries, especially Brazil, account for much of the company's marketing efforts. Income investors with a need for portfolio diversification and a desire for international exposure will find this stock of interest.