To Sell or Keep North State

Dear Mr. Berko: My father-in-law’s portfolio has 100 shares of North State Communications, which my wife and I think he bought in 2004 or 2005. Dad had Alzheimer’s disease, lived in High Point, North Carolina, and recently passed away. We can’t find any record of his purchase, though his deposit slips to High Point Bank go all the way back to 2005. Mom is still living but has little knowledge about this stock (she thinks Dad paid $96 a share), though she’s familiar with Cincinnati Bell, AT&T, Vodafone, Verizon, Frontier, Sprint, CenturyLink, Shenandoah Telecommunications Co., Consolidated Communications and other telecom stocks that she owns. We can figure out most of this stuff, but we need your advice on North State because we can’t find reports on this company. Our question is: Should Mom sell North State or keep it? She will keep the others. — FW, Durham, N.C.

Dear FW: North State Telecommunications Corp. (NORSB-$60.70) may be the biggest small telecommunications company you’ve never heard about. NORSB is a modern, finely tuned and well-managed company headquartered in High Point and founded in 1895. Today, 121 years later, NORSB is ably run by Patrick Harman, the grandson of NORSB’s founder. The company posted $109 million in 2015 revenues, or some $272,000 per employee.

NORSB, with 68,000 miles of high-capacity fiber optics, is a very modern telecom company. It provides landline and cellular phone service, residential and business services, web hosting, yellow pages, cloud hosting, data management, and digital TV to 600 square miles of rustic, bucolic communities with such names as Thomasville, Archdale, Randleman, Jamestown, Kernersville, Greensboro and Trinity. In 2015, NORSB posted nearly $9.6 million in net income, so each of its 400 employees contributed about $24,000 in profits to the company. Most of the townsfolk like this local company; we can’t say that about folks in Miami, Phoenix or Chicago, many of whom compare their phone companies to the IRS or the DMV. When things go wrong (and they do), the townsfolk know whom to call. And when they call, they call their service technician by his given name and usually get friendly next-day service.

NORSB pays a $1.30 quarterly dividend ($5.20 annually) yielding 8.3 percent. It has paid this dividend since its initial public offering in 2004, when the stock traded at over $100 a share. Part of the reason for NORSB’s high yield is that there’s little to no revenue growth in the company’s service area and, consequently, there’s little to even less principal appreciation. All earnings improvement must be organic and derive from continued operating and equipment efficiencies rather than customer growth. The stock basically trades by appointment, as there are only 886,000 shares outstanding; some days, it doesn’t trade at all.

NORSB’s numbers look just fine. There’s $3.8 million in cash. Debt is approximately 48 percent of revenues. Book value is just under $43 a share. Net profit margins run about 8.86 percent. Return on equity and return on assets are 2.2 percent and 9.51 percent, respectively. Last year, earnings before interest, taxes, depreciation and amortization came to $27.75 million, and 34 percent of EBITDA, or $9.61 million, translated into net income. Meanwhile, Franklin Value Investors Trust has 22,000 shares. It is the only mutual fund that owns the stock, but High Point Bank has 21,000 shares in its portfolio.

I like phone companies. But things were so different before they changed! Phone companies used to be impervious to inflation, depression and the economic cycle. Not so today, as telecom companies’ revenues have become an important and vital function of our business and data climate because of their involvement in almost every aspect of commerce. NORSB’s service area is dominated by a $5 billion furniture industry, various small liberal arts colleges and numerous small businesses, which are not conducive to dynamic revenue growth for NORSB. But I’d keep NORSB for the dividend — certainly not for principal appreciation. I know that the dividend isn’t covered, but I’m told that 2016 revenues and earnings will be sufficient for the $5.20 dividend to be fine.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.


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Drew Limsky

Drew Limsky



Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.