Verizon: Dividend Stock Analysis

| About: Verizon Communications (VZ)

The Company Stock Description:

Born from the merger between Bell Atlantic Corporation and GTE Corporation on June 30, 2000, Verizon (NYSE: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 (NASDAQ:AAPL), 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 for both iPhone and Android (NASDAQ:GOOG). 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 the 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