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The 2 Best Cable Provider Stocks to Buy in 2017

A scissors cuts a cable cord in front of a background of $100 bills.

Cable has become a game where the rich get richer.

Even in a market where consumers have been slowly cutting the cord with traditional pay television, that remains true. Comcast (NASDAQ: CMCSA) , and Charter Communications (NASDAQ: CHTR) have shown that just because a part of your business model faces negative headwinds doesn't mean your business has to collapse.

In fact, while the makeup of subscribers has changed in Charter's case, both companies now serve more customers than they ever have. These companies remain the top two providers of traditional cable television and the top two providers of broadband.

That second fact positions both companies well for the changing television market. It's possible that both could see less revenue from cable but still post overall growth.

A scissors cuts a cable cord in front of a background of $100 bills.

Cord-cutting may not be the industry killer many expect. Image source: Getty Images.

What's happening in the cable industry?

The number of people subscribing to traditional pay-television services, which includes cable and satellite from providers representing about 95% of the market in the United States dropped by about 795,000 subscribers in 2016, according to data from Leichtman Research Group (LRG). That's up from a loss of around 445,000 the year before. The industry lost another 410,000 subscribers in Q1 2017, which is significant because it gained 10,000 during that quarter in the prior year.

"This marked the first time that the industry has ever had net subscriber losses in the first quarter of a year," said LRG President Bruce Leichtman in a press release.

Comcast has managed to buck those trends. The company added 161,000 cable subscribers in 2016 and another 41,000 in Q1. Charter was not as lucky, losing 187,000 cable customers in 2016 and dropping another 89,000 in Q1.

Those are still relatively minor losses for a brand that closed 2016 with 17.22 million cable subscribers, second only to Comcast's 22.5 million. What's also important for shareholders or potential investors in these companies is that both brands added an impressive amount of broadband customers.

What's happening in broadband?

If people choose to cut the cord with cable, they generally do so to replace it with a package of paid streaming services or a digital streaming television package. It depends on how austere someone chooses to be as to whether cord-cutting proves to be worth it , but no matter what digital product you replace cable with, you still need an internet connection. And in many cases, because you've dropped cable, you'll pay more for that connection.

In 2016, Comcast added 1.37 million broadband customers while Charter saw 1.6 million new additions, according to LRG . Those gains grew in Q1, where Comcast added 430,000 more broadband users and Charter picked up 458,000.

Why are these the top cable stocks?

Cord-cutting may eventually cost Comcast some customers and it has already done that to Charter. Both companies, however, have been able to turn that negative into a positive by growing their broadband user base. That should continue for the foreseeable future, meaning that while they may see a shift in their revenue mix, neither company will face a big hit from fewer Americans' willingness to pay up for cable.

That may change someday if a competitor figures out how to cheaply deliver the internet without having a massive infrastructure. That doesn't appear to be imminent, or even on the horizon. Until that happens -- and Comcast and Charter may well have an answer for it if it does -- these two companies remain at the top of their field with solid, growing customer bases.

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Daniel Kline has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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