The high payout provides a solid income for investors, as the current yield is not only exceptional but also backed by an 18-year track record of consecutive increases.
Verizon’s stock is also relatively cheaply valued, yet it’s in a strong market position that generates stable cash flows.
Revenue growth should continue to scale as the company capitalizes on rising 5G demand. Meanwhile, the stock trades at just 9.8 times the company’s forward earnings forecast.
VERIZON COMMUNICATIONS INC. (New York symbol VZ) is the second-largest wireless carrier in the U.S. after AT&T (see above), with 114.2 million consumer cellphone subscribers. It also sells traditional telephone lines, high-speed Internet and TV services.
The company has now agreed to acquire Frontier Communications Parent Inc. (Nasdaq symbol FYBR) in an all-cash deal valued at $20 billion. To put that cost in perspective, Verizon’s market cap (the total value of all outstanding shares) is $189.0 billion.
Frontier provides high-speed Internet access through fibre-optic lines to 2.2 million subscribers across 25 states. The purchase will expand the reach of Verizon’s fibre network to 25 million premises across 31 states and Washington, D.C. Expanding its high-speed Internet service will also help Verizon attract and retain mobile phone customers with discounted service bundles.
Assuming Frontier shareholders and regulators approve, Verizon should complete the purchase in late 2025. It also expects eliminating overlapping operations will let it cut $500 million from its annual costs by the end of the third year.
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In the second quarter of 2024, ended June 30, 2024, Verizon added 148,000 wireless phone subscribers under long-term contracts (net of cancellations). However, due to lower sales of new phones, revenue rose just 0.6%, to $32.80 billion from $32.60 billion a year earlier. That missed the consensus forecast of $33.06 billion.
Excluding one-time items, per-share earnings fell 5.0%, to $1.15 from $1.21 on higher interest and depreciation charges. That matched the consensus estimate.
Dividend Stocks: 5G leader maintains an 18-year payout growth streak
For 2024, Verizon expects its revenue from its main wireless division will rise between 2.0% and 3.5% as more users upgrade to faster 5G speeds. As well, now that the company has completed the bulk of those network upgrades, capital spending should fall from $18.8 billion in 2023 to $17.25 billion in 2024.
The lower capital spending will let Verizon keep raising your dividend. The stock also trades at just 9.8 times the forecast 2024 earnings of $4.56 a share.
With the November 2024 payment, Verizon will raise your quarterly dividend by 1.9%, to $0.6775 a share from $0.655. The new annual rate of $2.71 a share yields a high 6.0%. With this increase, the company has now raised its dividend each of the past 18 years.
Verizon has now raised your dividend by an average of 2.0% annually over the past 5 years. The stock holds a Highest TSI Dividend Sustainability Rating.
Recommendation in Wall Street Stock Forecaster: Verizon Communications Inc. is a buy.
