The Company Stock Description:
Born from the merger between Bell Atlantic Corporation and GTE Corporation on June 30, 2000, Verizon (VZ) provides communication services in the United States and globally. They have separated their activities into 2 segments: wireline & wireless. We find the “usual” activities of a telecommunications giant such as cable, internet, phone services, etc. With the acquisition of Alltel Wireless in 2009, Verizon surpassed AT&T (read T stock analysis) for the title of the largest wireless carrier. Strong from its deal with Apple, VZ has become the flavour of the month on the stock market.
Stock Graph
The Company Ratios and Financial Info:
Dividend Metrics:
– Current Dividend Yield 5.03%
– 5 year Dividend Growth 3.64%
– 1 year Dividend Growth 2.79%
Company Metrics :
– Sales Growth: -1.15%
– Sales Growth (5 years): 4.99%
– Earnings Growth: 30.19%
– P/E Ratio: 17.28
– Payout Ratio: 213.72%
– Return on Equity: 6.38
– Debt to Capital Ratio: 0.52
Stock Metrics:
– Ticker: VZ (NYSE)
– Price: $37.84
– Trend (technical analysis): up trend (YTD)
Upcoming opportunities and dangers:
Verizon made a great move from a strategic point of view by being a provider of both iPhone and Androids. This gives them great positioning in the mobile industry. The number of subscribers is growing and VZ is recognized as a strict cost controller.
As for potential dangers, I would think that while Verizon is focusing on beating up AT&T, it might underestimate local wireless provider competition. This is a field with rapid evolution and such a behemoth might not be fast enough to react.
Final Thoughts
I like the dividend yield and I like the active management which was able to get a contract for the iPhone. However, I don’t like the dividend payout ratio and the fact that VZ has been the flavour of the month in 2011. I think it is a good dividend stock, but I am not sure it the timing is right (over short term) to buy it. Overall, if you are looking for a long term investment VZ is definitely a good pick.
Disclaimer: I do not hold position on Verizon
Like you said, the payout is insane … Is that just this year or is there a historical trend?
I just never really liked US telecom firms. It’s easy to switch cell phone companies, service level is similar at most companies and consumers are typically after the coolest phones. Yet it is expensive to build and maintain a telecom network. Many investors think that telecom is like utilities, but it is not. It used to be in the 1980’s before the old AT&T got broken into several companies..
@DGI,
I saw several sites comparing telecom with utilities as well. I guess that when you are looking at bigger companies such as AT&T and Verizon, it’s easier to compare them with utilities as they lose customer to their competitor while gaining some from the same company!
I think that those big giants will have a hard time competing with smaller companies in the future as you have more local telecom emerging at the moment.