Verizon Has A Safe (And Growing) Dividend: The Numbers Prove It

Jan. 09, 2019 11:15 AM ETVerizon Communications Inc. (VZ)16 Comments
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WG Investment Research


  • Verizon pre-announced strong subscriber numbers for the period ended December 31, 2018, and the stock popped ~3%.
  • Verizon should be viewed as an income play (with some growth prospects as a kicker - e.g. 5G) that has a supportable dividend and great dividend growth prospects.
  • I am long Verizon and plan to get longer in the months/quarters ahead.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

On January 8, 2019, Verizon's (NYSE:VZ) stock jumped by almost 3% after management reported strong subscriber numbers for the most recent quarter. This pre-announcement is extremely encouraging news for this large telecom as it heads into a new year. In today's market, I believe that Verizon is just the type of company that investors should be interested in, especially given the increasing possibility of an economic slowdown (I am not in the "recession is coming in 2019" camp, yet) in the next 12-18 months.

Verizon enters 2019 after a year of outperforming both its closest peer, AT&T (T), and the broader market by wide margins.

ChartVZ data by YCharts

Looking ahead, however, I still believe that the stock has room to run. Since Verizon is viewed as a defensive, income play, some pundits are concerned about the company's dividend growth prospects. But, if you ask me, this company has the potential to significantly increase its dividend in the years ahead, and the number prove it.

The Dividend Is More Than Safe - The Numbers (The Debt Balance, Cash Flow Metrics, And Payout Ratio) Prove it

Debt Balance

Verizon obviously operates in a capital-intensive industry, so it should come as no surprise that the company has a high debt balance. For example, Verizon's long-term debt has increased by almost 9% over the last three years.

ChartVZ Total Long-Term Debt (Annual) data by YCharts

As of September 30, 2018, the company's debt balance stood at approximately $113B, which seems like (and is) a lot of money, but it is important to note that Verizon's debt is scheduled to mature at a reasonable clip over the next four years (the uptick is coming in 2022).

Source: Q3 2018 10-Q

Source: 2017 10-K

And, more importantly, the company's net debt-to-consolidated adjusted EBITDA ratio has actually come

ChartVZ PE Ratio (TTM) data by YCharts

ChartVZ PE Ratio (TTM) 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, T. 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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