If you are determined to stay long equities and have concerns about what to have in a portfolio now, you aren’t alone. Many investors continue to feel stocks are the best place to be, but that momentum high-beta names could be poised to take a big hit. One great place to look is telecom and cable stocks.

A new report from the analysts at UBS maintains that the outstanding free cash flow generated by the market leaders in the industry make them solid investments, especially now. One thing consumers always tend to stay with, even in a bad economy, is entertainment, and the three stocks to buy at UBS deliver content and Internet access in a big way. All three are rated Buy.

AT&T

The nation’s largest carrier is also a free cash flow champ. AT&T Inc. (NYSE: T) has dominated the telecom scene for years, and while some analysts are lowering the company’s postpaid adds for the second quarter, many across Wall Street are becoming increasingly bullish on the Mexico business and the completion of the DirecTV deal, both of which look to add solid future revenues.

The UBS team points out in the report that AT&T provides the highest dividend yield among the mega-caps at 5.39%. With the close of the DirecTV acquisition, the dividend payout will improve to 70% (from 96% as a standalone figure last year), providing a much more comfortable level for sustainable dividend growth going forward as the company will have a much safer margin for coverage.

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With content spanning not only the DirecTV offerings, but also the U-verse packages that AT&T provides, investors nervous over a very shaky market can feel good about adding the stock to portfolios now.

AT&T investors are paid an outstanding 5.4% dividend. The UBS price target for the stock is $42. The Thomson/First Call consensus price target is $36.54. The shares closed trading on Wednesday at 34.79.
Comcast

The stock was recently added to the Russell 1000 and could have big upside potential. Comcast Corp. (NYSE: CMCSA) is a leading media stock and is growing earnings substantially with extremely strong content revenue growth. Increased revenue at NBC Universal (NBCU) is also giving the company some earnings tailwinds, and a growing sports lineup is adding to revenues.

After over a year of haggling with regulators, the company abandoned plans in the spring to acquire Time Warner Cable, which was ultimately bought by Charter Communications. Comcast reported better-than-expected profit and revenue growth in its first quarter, as its broadband division logged its strongest revenue growth in more than four years.

Wall Street analysts see very strong performance at NBCU and cite the “Jurassic World” and the “Minions” spin-offs as movies that are expected to be huge. They also think that the AT&T-DirecTV deal closing could drive incremental demand for Comcast programming. The UBS team sees cable giants like Comcast as a top growth story that still has plenty of room to run, as well as generating solid earnings to support continued stock buybacks.

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Comcast investors are paid a 1.6% dividend. The UBS price target is $66, but the consensus target is posted at $67.46. Comcast closed trading Wednesday at $61.69 per share.

Charter Communications

This is another cable giant the UBS team sees as a top growth story. Charter Communications Inc. (NASDAQ: CHTR) was the big benefactor of the Comcast/Time Warner Cable deal collapsing due to regulatory concerns. The massive $55 billion deal to acquire Time Warner Cable is expected to get approval from the FCC, and company executives have stated that the combination of the two will allow Charter to accelerate the deployment of faster Internet speeds, state-of-the-art video experiences and fully featured voice products at highly competitive prices. They also maintain that the new Charter will capitalize on technology to create and maintain a more effective and efficient service model.

The UBS analysts are very positive on the combination and believe that the stock will benefit from the deal closing, which allows for stronger synergies and a very attractive valuation that could produce as much as 20% free cash flow growth. It is also important to note the shares have been hit hard by risk arbitrage traders and should rally nicely on official approval.

The UBS price target is posted at $220, and the consensus price objective is $200.65. The stock closed on Wednesday at $172.27.

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The bottom line here for investors is a solid dividend play with AT&T and solid cable growth stories with the other two. All three will provide solid free cash flow, and that makes good sense now for investors in rocky market waters.

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