Verizon: The 'Pay Raise' Was Nice, But There Is More To The Story

Sep. 10, 2018 5:23 AM ETVerizon Communications Inc. (VZ)14 Comments
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WG Investment Research


  • Verizon recently increased its quarterly dividend by ~2% - i.e., shareholders got a pay raise.
  • This telecom company should now no longer be viewed as just an income play.
  • I plan to stay long Verizon; how about you?
  • Members of my private investing community, Going Long With W.G., can follow this idea, as well as my other top picks with access to my model portfolio. Start your free trial today >>

Verizon (NYSE:VZ) recently announced a quarterly dividend increase of 2.1% (from $0.59 to $0.6025), which brings the stock's forward yield to a rich 4.4%. As a shareholder, I love getting a "pay raise" but, in my opinion, there is a lot more to like about Verizon as a long-term investment than just a slow-growing dividend.

There Are Other Reasons To Stay Long The Stock

Investor sentiment has been a major problem for Verizon and its shareholders over the last few years, and rightfully so, as the company has had to contend with a challenging operating environment due mostly to the ongoing wireless price wars. The AOL/Yahoo! acquisitions did not help either (i.e., investors were not excited about acquiring these digital assets).

I, however, added shares in the upper-$40 range over the last year because I believed (and still believe) that Verizon was being properly positioned for the future, as described in this article.

Source: Q4 2016 Earnings Presentation

While there are currently questions about Verizon's intentions with the digital media assets, especially when considering the potential departure of Tim Armstrong, I still believe that the company is positioned to greatly benefit from the two main growth areas - Internet of Things ("IoT") and Network Leadership.

Moreover, Verizon recently reported Q2 2018 operating results that showed that there are plenty of reasons outside of the dividend to stay invested in this telecom giant. The company reported adjusted Q2 2018 EPS of $1.20 (beat estimates by $0.06) on revenue of $32.2B (beat estimates by $420M), which compares favorably to what Verizon reported in the same period of the prior year.

Source: Q2 2018 Earnings Presentation

Highlights from the quarter:

  • The company beat the top- and bottom-line estimates and it reported YoY growth in both revenue and earnings.
  • The wireless division reported strong
ChartVZ PE Ratio (Forward) data by YCharts

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long VZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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