Verizon (VZ) Stock Analysis
The Verizon (VZ) dividend has been paid continuously since 1984 (formerly Bell Atlantic) and increased for 12 consecutive years; qualifying the company as a Dividend Contender.
Current Dividend: $2.31
Dividend Yield: 5.3%
Cash Dividend Payout Ratio: Negative
Market Capitalization: 177 B
Enterprise Value: 291 B
Sector: Communication Services
Industry: Telecom Services
Verizon (VZ) is a communication, information, and entertainment provider of products and services to consumers, businesses, and government agencies.
The company is the largest U.S Wireless provider (113 million retail connections) and also offers wireline and broadband services.
Dividend Analyzer Checklist
(updated June 2017)
Dividend Safety Score (5/33 points)
Dividend Per Share (ttm): $2.30
Dividend Payout Ratio (ttm): 76%
Dividend Per Share (10 Year Growth): 3%
Cash From Operations (CFO) Per Share (ttm): 4.14
CFO Dividend Coverage (CFO / DPS): 1.8 (0/6 points)
Free Cash Flow (FCF) Per Share (ttm): $-0.11
FCF Dividend Coverage (FCF / DPS): -0.0 (0/6 points)
Net Financial Debt: $112239 M
Total Assets: $246731 M
Net Financial Debt / Total Assets: 45% (2/12 points)
Net Financial Debt to EBITDA (ttm): 274%
Total Liabilities to Assets Ratio (Qtr.): 90%
Piotroski Score (1-9) (TTM): (3/9 points)
Profitability & Growth Score (18/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: 3.6% (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 5.5% (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: -0.6% (0/6 points)
Operating Earnings Yield (ttm): 13.8% (7/7 points)
Net Income (ttm): $12267 M
Gross Profit (ttm): $73145 M
Total Assets: $246731 M
Gross Profitability Ratio = GP / Total Assets: 30% (7/12 points)
Cash Return On Invested Capital (CROIC)(tttm): -0%
Return on Invested Capital (ROIC): 9%
Return on Invested Capital (ROIC) (5 Year Median): 8%
Return on Invested Capital (ROIC) (10 Year Median): 5%
Valuation Score (18/34 points)
Free Cash Flow Yield (ttm): -0.2% (0/9 points)
EV to EBIT (ttm): 12.8 (6/9 points)
EV to EBITDA (ttm): 7.7 (7/9 points)
PE10: 20.6 (5/7 points)
Price to Sales Ratio (ttm): 1.5%
Price to Book Value (ttm): 7.7%
Price to Earnings Ratio (P/E) (ttm): 14.8
TOTAL POINTS – (41/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
Stay Updated All the Time!
- Monthly Stock Rankings and Dividend Safety, Profitability & Growth, & Valuation Scores for all 250+ DVB Stocks - Dividend Value Builder Full Membership => $99/year (Analyzer & Portfolio Newsletters)
SWOT Analysis For Verizon
Verizon Wireless has the most geographic coverage and the highest quality network. This has produced customer loyalty (low turnover rate) and profitability.
The billions spent in building their network has created a large barrier to entry for other challengers. Verizon has consistently captured more than its share of the growth from the high value post paid customers.
The 2014 purchase of Vodafone’s 45% interest has saddled the company with a great deal of debt. The increased leverage comes at a time when wireless business growth is slowing considerably.
Verizon is losing market share in the residential internet access, phone, and television segment of its business to cable & wireless companies. This will make it difficult for the company to justify investments to expand its FiOS network into new areas.
Owning 100% of Verizon Wireless allows the company to bundle services that are attractive to consumers and increase profitability.
The recent acquisitions of AOL and Yahoo provide Verizon the opportunity to monetize the the massive user bases of these businesses. Only time will tell if Verizon can do what AOL and Yahoo was unable to do successfully.
The substantial price increases to obtain spectrum from the government increases the cost of infrastructure without compensating increases in revenue. Any increase in costs hurt profitability in a competitive environment where growth is small or non-existent.
Verizon’s leveraged balance sheet and declining cash flow put the long-term viability of sustaining the current dividend at risk.
(updated June 2017)
Verizon (VZ) is ranked #165 (out of 252) overall and #5 (out of 6) in the Communications Services Sector by the Dividend Analyzer.
Low growth and the need for massive amounts of capital spending means that the upside of owning the stock is limited. Verizon is leveraged, making it riskier than before they bought their own shares from Vodafone.
In my mind the sole reason to own Verizon is the dividend. I believe the dividend is no longer safe so I would avoid Verizon unless conditions change or the price falls to the point where you are compensated for the extra risk. AT&T is a better option for dividend portfolios looking for high-yield income.
Type of Investor / Recommendation:
Large Diversified Dividend Portfolios / Below Average Option
Looking For Exposure to Communications Sector / Can Be Considered
Deep Value Investors / AVOID
Portfolio Position Disclosures:
DVB Foundation Portfolio: None
DVB Dividend Growth Portfolio: None
DVB High Income Portfolio: None
Arbor Asset Allocation Model Portfolio (AAAMP): None
Dividend Investing Without Emotional Bias
Dividend Value Builder Analyzer Newsletter: Total, Dividend Safety, Profitability & Growth, and Valuation Scores For all 240+ stocks in the DVB database, Top Stocks For Each Sector.
Dividend Value Builder Portfolio Newsletter: DVB Foundation Portfolio, DVB Dividend Growth, and DVB High Income Portfolios.