In the highly competitive wireless business, this stock continues to build its customer base successfully.
An astute 2017 acquisition has boosted the company’s Internet operations and is already making a significant contribution to revenue. At the same time the stock is trading at a moderate 10.7 times projected earnings for 2018. The dividend, raised 11 years in a row, yields a high 4.8%.
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VERIZON COMMUNICATIONS INC. (New York symbol VZ; www.verizon.com)has 116.2 million wireless users, 12.6 million traditional phone customers and 15.5 million Internet and TV subscribers.
In 2014, the company bought the 45% of the Verizon Wireless joint venture it didn’t already own from U.K.-based Vodafone Group (Nasdaq symbol VOD). Verizon Wireless sells wireless services in the U.S. Verizon paid $130 billion for Vodafone’s stake.
The company is aggressively expanding its Internet operations. In 2017 it paid $4.5 billion for Yahoo! Inc.’s Internet search business and related websites. These operations attract 1 billion active users every month.
Verizon later merged the Yahoo operations with the AOL websites it acquired in 2015 (including The Huffington Post, TechCrunch and Engadget). That combined business is called Oath.
Thanks to the Vodafone purchase, the company’s revenue rose 14.0%, from $115.8 billion in 2012 to $131.6 billion in 2015. In 2016, Verizon sold some of its local telephone operations. As a result, revenue for that year fell to $126.0 billion.
Earnings jumped from $2.32 a share (or a total of $6.0 billion) in 2012 to $4.00 a share (or $11.5 billion) in 2013. Profit then fell to $3.35 a share (or $13.3 billion) in 2014, but rebounded to $3.99 a share (or $16.3 billion) in 2015. Earnings fell to $3.87 a share (or $13.6 billion) in 2016.
Value Stocks: New 5G high-speed wireless service being tested in 2018
In the quarter ended March 31, 2018, Verizon earned $4.55 billion, or $1.11 a share. That’s up 31.7% from $3.45 billion, or $0.84 a share, a year earlier. If you disregard unusual items, earnings per share gained 23.2%, to $1.17 from $0.95.
Revenue in the quarter increased 6.6%, to $31.8 billion from $29.8 billion a year earlier.
Verizon added 260,000 wireless subscribers in the first quarter (net of cancellations). Of that total, 220,000 signed long-term contracts. Most of those new long-term customers use smartphones. Those devices generate higher profits for Verizon than regular cellphones.
Oath contributed $1.9 billion to overall revenue in the fourth quarter.
Verizon is also testing its new 5G high-speed wireless Internet service in three to five U.S. cities in 2018. If successful, 5G technology will make it easier to offer Internet and TV services to more households.
The company may be facing a more formidable competitor now that T-Mobile and Sprint, the third and fourth largest wireless carriers in the U.S., have agreed to merge. The two reached agreement this week after more than three years of negotiations. However, the proposed merger must still clear U.S. anti-trust regulators.
Starting November 2017, the company raised its quarterly dividend by 2.2%, to $0.59 a share from $0.5775. Verizon has now increased its dividend each year for the past 11 years. The new annual rate of $2.36 yields a high 4.8%.
Verizon will probably earn $4.56 a share in 2018. It trades at a low 10.7 times this year’s earnings forecast.
Recommendation in TSI Dividend Advisor: Verizon is a buy.
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