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- Verizon Wireless has not reduced its dividend payments in 30 years.
- The company is the leader in wireless with a market share of 34%.
- Verizon's solid dividend yield and future growth prospects make it a compelling investment for exposure to US telecommunications.
- Is Verizon overvalued, undervalued or fairly valued?
Why Dividend Growth Investors Should Buy Verizon Instead Of AT&T Or Sprint
- AT&T has a higher dividend yield than Verizon, but weaker earnings growth and lower dividend growth.
- Sprint's inconsistent profitability and no dividend make it too speculative to buy.
- Verizon offers the best mix of revenue and earnings growth, along with a high dividend yield and solid dividend growth. This makes it the best pick of the three.
Verizon Powers Forward After Delivering Strong Third Quarter Results
- Third quarter results show solid growth in wireless segment and FiOS.
- VZ has ability to add new subscribers with rising ARPA and maintain lower churn in competitive environment.
- Company eager to participate in upcoming spectrum auction.
Verizon Posts Solid Third Quarter Results As Competition Continues To Toughen
- Verizon’s third quarter highlights reported total revenue of $31.6 billion, growing by 4.3% year on year and by 0.3% sequentially. Net income increased 68.2% over the third quarter of 2013.
- Earnings per share were reported at 89 cents and grew by 15.6% relative to last year.
- Margins for the company eroded as price competition stiffened in the market. Further margin erosion is expected in the future as competition is showing signs of heating up.
- Share prices have remained relatively stable over the course of the past six months. The yearly range for share prices was reported at $45.45-$53.66.
- The price target for shares is of $53.71. The company offers high dividend yield of 4.5%, and trades at a P/E ratio of 10.54.
Solid Growth Rate And Rewarding Shareholders Key Features Of Verizon
- Company keeps translating operational success into cash flow growth.
- VZ’s capital allocation strategy being focused on sharing success with shareholders through dividend payments remains secure.
- Company offers attractive dividend yield of 4.5%.
Is High-Yielding Verizon Worth A Position In Your Portfolio Right Now?
- The dividend is pretty large and is only at a 47% payout ratio of trailing twelve month earnings.
- I calculate a bit more reward than risk at these current levels.
- The one thing I don't like is that 2015 earnings are expected to be less than the trailing twelve month earnings.
Update: Impressive Growth In Key Metrics Shows Verizon Is One Of The Best Picks In The Sector
- The company announced its third quarter earnings.
- Verizon recorded impressive growth in key metrics.
- We maintain that Verizon is one of the best picks in the sector.
- Most Q3 wireless metrics were disappointing as Verizon started to react to Sprint’s aggressive pricing initiatives.
- Pressure is mounting on Verizon in the seasonally-strong Q4 as Sprint rolls out a compelling iPhone 6 leasing plan.
- We remain convinced that Verizon will have to implement 5% to 10% price cuts in the next 12-24 months, with a -4% to -8% impact on EBITDA.
Verizon Communications: Soft Quarter, But Dividend Appeal Remains
- Verizon Communications posts a somewhat weaker third quarter earnings report.
- This results from intensifying competition in the wireless segment.
- Given this development and the leveraged balance sheet, I remain cautious, although dividend investors will probably find shelter in the shares.
- The company’s wireless business revenue has increased by 6.8 percent in 2013 compared to 2012.
- Instead of subscriber growth, revenue gains are expected from higher spending by existing subscribers.
- Average monthly spending per subscriber is estimated to increase to $59.75 by 2017.
- Price target of the company is expected to increase by 15 percent by the end of next year.
Update: Verizon 'Slightly Disappoints' With Third Quarter Earnings
- VZ earned $0.89/share, missing reduced estimates by $0.01; wireless margins dropped.
- Results were a little worse than expected, especially since EPS estimates were reduced $0.04 in last 60 days.
- I continue to believe VZ is superior telecom investment due to high margins and lower risk profile.
- Verizon's recent boom in subscribers indicates high levels of trust in company's products.
- IPhone sales will drive successful numbers potentially well into the 4th quarter.
- Financials all indicate at least marginal rise across the board, and historically will be see a slight boost in the near future.
- We have seen strong ratings for Verizon and believes it is the clear leader in the Telecom sector for investors.
- Investment rationale includes dividend yield, attractive entry and valuation, strong management and expected earnings growth.
- 3Q announcement of earnings should be positive for Verizon.
The Biggest Benefit Of Verizon And AT&T May Be Low Volatility
- Verizon and AT&T have dominant market positions and favorable economics, which underpin sizable dividend returns from each company.
- High-yielding stocks occasionally get overlooked in periods of strong stock price appreciation, but come back into favor in slower-moving markets.
- High-yield stocks confer a number of advantages to an investor, including large cash returns and the ability to accelerate income through reinvestment.
- Both AT&T and Verizon have favorable economics, which could make them strong candidates for investors, particularly if we move into a period of high volatility and low price appreciation.
High-ROE, Low-PE Investing - As It Applies To AT&T And Verizon Communications Inc.
- High-ROE, low-P/E investing is simple to understand and implement.
- You harness the power of compounding, as well as the discipline of not overpaying for equity.
- AT&T and Verizon both meet this criterion.
Verizon Communications Inc. Is Focused On Generating Cash And Lowering Debt
- Verizon Communications Inc. is the largest U.S. wireless carrier. Verizon also offers wireline and broadband services primarily in the northeastern U.S.
- The company's focus is on lowering the debt level resulting from the $130 billion buyout of Vodafone Group plc’s 45% interest in Verizon Wireless.
- Following in AT&T's and T-Mobile's footsteps, VZ is exploring the potential benefits of divesting its cell towers.
Verizon Trumps AT&T On Margin, Growth And Lower Risk
- AT&T's 5.4% dividend gets all the headlines.
- Verizon should be appreciated for its superior margins and growth, lower risk and management acumen.
- AT&T's DirecTV deal poses risk that Verizon avoids.
- Both companies are strong, but Verizon offers more appreciation potential and is less prone to churn than its rival.
Mon, Nov. 24, 10:26 AM
- Citing higher spectrum and network investment costs, and the revenue impact of tougher price competition, Citi's Michael Rolling has downgraded Verizon (VZ -1.9%) to Neutral. AT&T (T -1.9%) is following Verizon lower.
- Rollins: "We believe the wireless industry is experiencing a great disconnect between the growth in data traffic and the growth in revenue ... We continue to fear that recent promotions create risk that the wireless industry at large may not be able to capture substantial incremental revenue from the rise in data consumption over time."
- Verizon has largely maintained its premium pricing in the face of major price cuts from T-Mobile and Sprint, but the carrier has been offering more data promos as of late. AT&T has been more willing to return fire, and has seen its wireless service growth revenue evaporate along the way.
- Last Friday: FCC auction bids hit $33B
Sat, Nov. 22, 3:37 PM
- The Rayno Report states Verizon (NYSE:VZ) has launched a major trial of bare-metal (commodity) switches running on a networking OS and SDN switching software respectively supplied by startups Cumulus Networks and Pica8.
- Light Reading backs up the report, while adding Verizon "aims to determine whether bare-metal switches ... could eventually replace more expensive, proprietary Juniper Networks Inc. (NYSE:JNPR) equipment." Nonetheless, Rayno reports Juniper is a part of the trial, supplying "routing and switching technology that helps tie the network together with VXLAN [networking virtualization] technology."
- Though the trial is in its early stages, both sites report hearing it's a big deal, given the potential for bare-metal/white-box gear to replace proprietary hardware on a large scale. "[Verizon] can reduce their costs massively," says a Rayno source. The trial coincides with the deployment by Verizon's cloud services ops of an SDN solution using server-based hardware from Super Micro (NASDAQ:SMCI).
- Cisco (NASDAQ:CSCO), which maintains a 60%+ data center switch share and a leading position in the carrier router market, has already called white-box hardware its biggest threat. Internet giants have been quick to embrace SDN/white-box solutions - Facebook has even open-sourced a data center switch design - and AT&T is looking to adopt SDN through its Domain 2.0 initiative.
- Cisco's recently-launched ACI/APIC SDN/networking virtualization solution is gaining traction within the company's enterprise base, but critics call it too expensive/proprietary - pricing for an APIC controller runs from $40K-$58K, and software licenses for ACI-capable switches run from $3K-$15K. Meanwhile, Verizon, AT&T, and other carriers are hungry to cut wireline capex.
- Juniper has adopted an SDN strategy that's more friendly to open platforms, but there might be some internal dissent on that front. Rayno reports recently-ousted CEO Shaygan Kheradpir "was more pro-SDN than the existing Juniper management, which is more conservative about protecting its installed base."
Fri, Nov. 21, 5:22 PM
- Following 26 rounds, total bids in the FCC's AWS-3 spectrum auction have reached $33B - up from $24B two days ago. Though the auction's pace has slowed, more than $1B worth of bids were still tallied in the latest round.
- Walter Piecyk observes the average bid is now at $2.04/MHz./POP, far above his initial estimate range of $0.75-$1.25, and that it implies DISH's existing spectrum assets are worth over $73/share alone. Dish rose 2.1% today to $73.70.
- Tim Farrar thinks Dish may have bid over $10B, as it tries to both add to its spectrum portfolio (thus increasing its strategic value to carriers) and inflate the value of its existing assets. In addition to bidding against AT&T, Verizon, and T-Mobile for paired spectrum assets (the auction's main prize), Dish is expected to be the winning bidder for 15MHz. of unpaired spectrum.
- Meanwhile, the FCC has announced it will vote on rules for its 600MHz. incentive auction (due in 2016, and expected to be even bigger) in December. If approved, the rules will then be opened for public comment.
- Sticker shock? While the S&P rose 1.2% this week, AT&T (NYSE:T) fell 1.7% and Verizon (NYSE:VZ) fell 2.5%.
Wed, Nov. 19, 6:48 PM
- Bidding in the FCC's AWS-3 spectrum auction has reached $24.1B barely 24 hours after topping $14B. Through 15 rounds, $1.19B alone was bid on a 10x10 MHz. license for the NYC area.
- "While bids could suddenly slow down, the auction appears on pace to blow through the top end of our expected range," writes BTIG's Walter Piecyk. Whereas Piecyk initially forecast an average bid of $0.75-$1.25/MHz./POP, spending has already topped $1.50/MHz./POP.
- Deep-pocketed AT&T (NYSE:T) and Verizon (NYSE:VZ) are likely the "most aggressive bidders," notes JPMorgan's Philip Cusick; he suspects T-Mobile (NYSE:TMUS) is bidding more cautiously. New Street Research thinks AT&T and Verizon "will likely both go after a 10x10 MHz pair in all of the critical markets."
- Tim Farrar suspects DISH is bidding up prices on the assumption AT&T/Verizon will respond by upping their bids regardless of the cost. This morning, Piecyk estimated the auction had served to increase the value of Dish's existing spectrum to ~$2/MHz./POP from ~$1.50/MHz./POP, thereby making Dish worth $104/share rather than a prior estimate of $85/share. Dish rose 10% in regular trading.
- Though bidding is expected to slow down soon, it might not fully end for a few more weeks. Until then, the FCC won't disclose the names of winning bidders, or how much they're paying.
Tue, Nov. 18, 4:09 PM
- Following 14 rounds, total bids in the FCC's AWS-3 (high-band) spectrum auction have reached $14.18B. Bids have been placed for 1,303 of the 1,614 available licenses, and a $10.1B aggregate reserve price has been surpassed.
- AT&T (T -0.4%), Verizon (VZ -0.3%), T-Mobile (TMUS -0.3%), and Dish (DISH +4%) are among the companies bidding on the spectrum, which includes paired licenses (50GHz. altogether) in the 1.7GHz. and 2.1GHz. bands (good for high-density urban areas). T-Mobile raised debt ahead of the auction to help finance its efforts.
- The furious bidding pace highlights the strong interest U.S. carriers have in growing their spectrum portfolios to cope with rapid mobile data traffic growth. An even bigger auction for 600MHz. (low-band) spectrum was recently delayed until 2016; AT&T and Verizon will face purchase restrictions in that one.
Fri, Nov. 14, 1:41 PM
- Pay-TV operators lost about 149K subscribers in Q3 to represent the industry's worst performance ever for the period, according to data compiled by Leichtman Research Group.
- The mark is slightly better than the 179K subs loss that Moffett Nathanson forecast.
- Based on seasonal trends, Leitchman forecasts a small increase in subscriber growth for Q4.
- Cable/satellite/telco Q3 sub scorecard: Comcast (NASDAQ:CMCSA) -81K, Time Warner (NYSE:TWX) -182K, Charter Communications (NASDAQ:CHTR) -24K, Cablevision (NYSE:CVC) -56K, Suddenlink +2.2K, Mediacom -19K, Cable ONE -14.1K, DirecTV (NASDAQ:DTV) -28K, Dish Network (NASDAQ:DISH) -12K, AT&T +216K, Verizon (NYSE:VZ) +114K, Others/Private -65K.
- Based on seasonal trends, Leitchman forecasts a small increase in subscriber growth for Q4.
- Related: Seismic changes coming for pay TV
Thu, Nov. 13, 8:46 PM
- Sony's (NYSE:SNE) new online TV package will price at $60 to $70 per month, estimates Re/code.
- It's a level that is twice what Dish Network (NASDAQ:DISH) plans to charge for a slimmer package, although one that includes ESPN.
- Programming on the Sony streaming service will feature shows from CBS, Discovery Communications, Fox, NBC, Scripps Networks, and Viacom.
- The pitch from the Japanese media giant is that cord-cutters will be drawn in by the captivating way of accessing the content through gaming consoles. A cutting-edge discovery and recommendations service for users is also highlighted by execs.
- Regulatory watch: Potential rule changes from the FCC could level the playing field for the new streamers as they work out their content deals.
- What to watch: A fragmented pay-TV landscape could benefit content producers (DISCA, CBS, FOXA, DIS, LGF, TWX, AMCX) in the short-term as competition heats up, while creating a pricing headache for cable/satellite/telco players (CMCSA, CVC, CHTR, DISH, T, DTV, VZ, TWC).
- The Netflix factor: Many media analysts consider Netflix (NASDAQ:NFLX) an add-on for consumers - instead of an either/or decision with online TV.
Fri, Oct. 31, 2:55 AM
- In response to Senator Patrick Leahy's letter last week urging top ISPs to not enter "paid prioritization" deals, Comcast (NASDAQ:CMCSA) and AT&T (NYSE:T) say they have no plans to create the Internet "fast lanes" which would hurt consumers' freedom to roam the Web.
- Verizon (NYSE:VZ) published its response to Leahy on Wednesday, also asserting that it has no plans for "fast lanes".
- The pledges come after the FCC proposed its "net neutrality" rules that prohibit ISPs from blocking content, but suggests allowing some "commercially reasonable" paid prioritization deals.
Wed, Oct. 29, 1:22 PM
- A bid by Aereo to be defined as a cable provider gained support from the FCC with a new proposal out this week which was described in a blog post written by Chairman Tom Wheeler.
- The agency supports "open access" for consumers to high-speed broadband delivery and the right of over-the-top firms to offer programming owned by pay-TV providers and broadcasters.
- In essence, the FCC thinks the bundled pay-TV model should be broken so that consumers will not be forced to pay for channels they never watch.
- What to watch: Though Aero isn't likely to be the ultimate pay-TV disrupter without the deep pockets to license content, the position of the FCC opens the door for other Internet video players to emerge and chips away at the bundled channels model.
- Related stocks: DISH, DTV, CMCSA, CHTR, CVC, TWC, VZ, T, NFLX.
Fri, Oct. 24, 1:16 PM
- The FCC's Incentive Auction, which will auction off a giant chunk of low-frequency (600 MHz.) spectrum historically used for TV broadcasts, is now set for early 2016 instead of mid-2015.
- The agency cites legal challenges from broadcasters, as well as the auction's complexity and "the need for all auction participants to have certainty well in advance."
- A recent FCC study (.pdf) meant to appease broadcasters estimated the auction could raise $45B. Sprint (S -0.1%) and T-Mobile (TMUS +0.1%), whose rural and in-building coverage has suffered from a dearth of low-frequency spectrum, are expected to spend aggressively.
- AT&T (T +0.1%) and Verizon (VZ +1%) are also expected to bid heavily, though the FCC plans to limit their purchases on account of their already-massive low-frequency assets. AT&T has said it plans to spend at least $9B.
- Dish (DISH +1.4%), which has a large chunk of high-frequency spectrum it's still trying to find a use for, plans to participate as well.
Tue, Oct. 21, 9:37 AM
- Verizon (VZ -0.8%) had 1.52M wireless retail postpaid net adds in Q3, up from 941K a year ago and indicating further share gains in spite of tough price competition; the total base is at 100.1M. Retail prepaid net adds totaled just 9K; the base is at 6.1M.
- Price competition is affecting wireless service revenue growth: Though still better than AT&T/Sprint's, growth slowed to 4.8% from 5.9% in Q2 and 7.5% in Q1. Meanwhile, Edge smartphone upgrade plan adoption contributed to a 28.9% increase in equipment revenue, which in turn contributed to a 190 bps drop in wireless op. margin to 31.9%.
- Retail postpaid churn rose slightly to 1.00% from 0.94% in Q2 and 0.97% a year ago. Retail postpaid ARPA +1% Q/Q and +3.5% Y/Y to $161.24.
- Smartphone users made up 77% of the retail postpaid base at the end of Q3, up from 75% at the end of Q2. Postpaid smartphone sales rose 21% Y/Y.
- Wireline revenue (30% of total revenue) fell 0.8%. Consumer retail revenue +4.5% thanks to FiOS growth and strategic services +1% due to data growth, but small business -4.1% and core -11.7% due to voice declines. Wireline op. margin rose to 2.3% from 1.5% a year ago.
- 114K FiOS video and 162K FiOS Internet subs were added; those figures are up from Q2 levels, but down from year-ago levels. Verizon now has 5.5M FiOS video and 6.5M FiOS Internet subs. Wireline voice connections fell 6.4% Y/Y to 20.1M.
- Verizon still expects 4% 2014 revenue growth; consensus is at 4.6%. Capex guidance has been narrowed to $17B from $16.5B-$17B.
- Q3 results, PR
Tue, Oct. 21, 7:33 AM
Mon, Oct. 20, 5:30 PM
Thu, Oct. 16, 7:11 PM
- Verizon (NYSE:VZ) has lengthened the amount of time needed to pay off a phone obtained through its Edge smartphone upgrade program from 20 months to 24, and is now requiring users to pay off 75% of their current phone's price before being eligible to upgrade (up from 60%).
- The net effect: Monthly payments will be lower, but users will only be able to upgrade phones every 18 months vs. 12 previously.
- Big Red is also increasing the service plan discount given to Edge subs on 500MB-8GB plans by $5/line to $15/line. Those on bigger data plans will still get a $25/line discount.
- Many of the early reactions have been critical. Engadget: "The big problem is simply that this now sounds more like a conventional contract rather than the fast track you were probably expecting." DSLReports thinks Edge is now "slightly worse" than before.
- However, Jefferies notes the changes will boost Verizon's EBITDA (since more of a phone's price has to be paid off), and that its monthly fees are now closer to those paid by users of AT&T's popular Next upgrade plans.
- Overall, the shakeup drives home Verizon's commitment to a premium pricing strategy in the face of never-ending price cuts and aggressive promos from T-Mobile and Sprint, many of which AT&T has responded to.
- Verizon has weathered the storm fairly well to date. Q3 results arrive on Oct. 21.
Fri, Oct. 10, 8:23 AM
- Scooping up Verizon's (NYSE:VZ) tower portfolio could position American Tower as (NYSE:AMT) the new leader in the U.S. tower market, Citigroup says in a note.
- A purchase would help AMT's scale and increase its exposure to VZ as an anchor tenant.
- Related: Bloomberg: Verizon looking to sell towers, could net $6B
Thu, Oct. 9, 6:57 PM
- GE "machines and devices" addressing markets such as rail, aviation, energy, and healthcare will support Verizon's (NYSE:VZ) machine-to-machine (M2M) connectivity services, as well as Verizon's cloud services.
- The companies declare the tie-up will allow them to deliver plenty of value-added services" for GE's Predix software platform for connecting and managing industrial device, including "remote monitoring, diagnostics and the ability to resolve maintenance issues" Verizon and GE will also work to create a global SIM for the connected hardware.
- Like AT&T, Verizon has been busy rolling out services providing mobile connectivity for embedded devices, hoping they can provide a top-line boost as standard mobile service revenue growth slows. Big Red's embedded offerings include services for cars and smart grids.
- M2M module vendors Sierra Wireless (NASDAQ:SWIR) and Novatel (NASDAQ:NVTL) must be pleased to see the partnership. Both companies count Verizon as a client.
- Previous: GE says data business headed for $4B-$5B in sales by 2017
VZ vs. ETF Alternatives
Verizon Communications Inc. is a provider of communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its two segments are Wireless and Wireline.
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