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Verizon: 8% Yield, Dividend Is Not At Risk

Sep. 22, 2023 12:56 PM ETVerizon Communications Inc. (VZ)22 Comments
Vektor Research profile picture
Vektor Research


  • Verizon's stock has been the worst-performing among its competitors, but price increases have helped drive wireless service revenue growth.
  • The company has struggled to increase customer growth, losing customers to competitors like T-Mobile and cable companies.
  • Verizon's recently cleared C-band spectrum will help it compete in wireless and Fixed Wireless Access offerings.
  • We believe that the dividend is not at risk. Capex is coming down to the BAU levels. Verizon possibly has more room to deleverage.
  • Shares are trading at a decade-low, with 7x forward P/E and 8% yield. Maintain BUY.

Verizon sign on the office building in San Diego, CA, USA.


Struggling to Increase Customer Growth, But Pricing Actions Come to Rescue

Verizon (NYSE:VZ) has been the worst-performing stock among the big three. Since last year, Verizon is down 18%, AT&T (T) has fallen 8%, while T-Mobile (

This article was written by

Vektor Research profile picture
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Analyst’s Disclosure: I/we have a beneficial long position in the shares of VZ, CHTR either through stock ownership, options, or other derivatives. 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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Comments (22)

VZ Wireless is doing a bang up business!
On watch list.
@katmandu100 dont get fooled, all these companies are going lower, maybe got another 50% to go.
" Big cable companies, such as Charter (CHTR) and Comcast (CMCSA) under Spectrum and Xfinity, add roughly 650,000 and 350,000 per quarter, respectively, as they have been aggressive in their pricing strategies."

Spectrum and Xfinity are very aggressive. They recently negotiated some changes in their MVNO agreements with VZ. They gave up on the idea of building a macro system. The additional volume will help spread VZ fixed network costs. Having the lowest internal cost per connection will help offset VZ's weak direct postpaid production.

I wonder who benefited from the change of MVNO agreements.

Charter claims nearly 90% of their mobile traffic is on their own networks. Likely similar for Comcast especially that now Charter/Comcast share each other's public WiFi networks. Comcast is still planning their own cellsites on CBRS spectrum. Comcast is leasing/selling their 600Mhz to Tmobile, and I wonder if they have an agreement to roam off Tmo if even just that band.

Charter/Comcast are not typical MVNOs as their use on VZ leans more like roaming use than complete dependence. VZ highly unlikely gets anywhere near as much ARPU from Charter/Comcast as other MVNOs.
@B26354 -- My point was that a connection from MVNO's will spread fixed network costs. That of course would not be the case if the total fees per MVNO account were less than VZ's internal marginal cost of a connection.
At 33 VZ is a growth stock with Target@39
With lead issue greatly diminished VZ is a screaming BUY!
Lucky Bumblebee profile picture
@rockjcp How is it greatly diminished ?
Likely bottomed.
@six sigma haha. thats what i said when it reached 40. we will see it goes down to maybe 18-20 dollars in the future
Marrk profile picture
Thanks for your article. I added today at $33. Looking forward to buying more.

Long & Overweight VZ
@Marrk So did I. Limit order filled at $33.00.
Thurston Howl the Turd profile picture
Ok, so the dividend is not at risk...BUT...your principal...IS...!!!
@Thurston Howl the Turd A good point as when VZ stock was in $40s there were mostly the same points made as in this article... and look what happened. If stock notably rises after the next Q earnings report then perhaps VZ's bottom has been hit. As usual, consumer subs relative to T/TMUS will probably drive the direction of stock.
" Thus, its mid-band footprint expansion in rural areas could provide VZ with a competitive advantage, in our view."

A bit more detail...

FWA should help VZ but still with some limits as even with upgrades (the extra spectrum will allow for 2.4Gbps per sector) there's still only so many subs they can allow per cellsite ~ 24x3 subs at 100Mbps prime time usage. In comparison TMUS is upgrading to 3.3Gbps per sector and not using all their spectrum yet. TMUS 2.5Ghz spectrum also has better range/penetration (up to 50% more range) than VZ's C-band at near 4Ghz so may have better success in rural areas. In terms of land mass, TMUS claims they have 2X more 5G midband coverage than VZ and 4X than ATT. VZ doesn't appear to have a competitive advantage in this sense. Even if TMUS overstates numbers, the capacity and range limit of spectrum physics mostly aligns and why VZ only expects about 4-5M subs compared to 7-8M for TMUS.

FWA for now is attracting better than expected from cable and even fiber (one study claims near 20% of FWA subs are coming from fiber) but CableCos aren't standing still, offering 300-500Mbps for $25-$40 depending on market and impact from FWA losses.

Many are giving FWA a shot and so far looking good but if the carriers aren't careful with capacity mgmt and oversubscribes resulting in slowdowns, many will go back to cable/fiber. The carriers also prioritize phone traffic over FWA. Put another way, the dust hasn't settled yet with 5G FWA, especially given CableCos are fighting back and FWA has capacity limits.
Vektor Research profile picture
@B26354 Thanks for your comment. Yes I agree that TMUS has better coverage with 2.5 GHz spectrum thanks to better signal propagation, but I assumed that the C-band spectrum, being the upper-mid band, should have better performance, though VZ will require more towers.

Yes, there are concerns about capacity limits although both companies have reiterated that capacity is not an issue. And TMUS said that they are selling excess capacity after reviewing "sector-by-sector." This seemingly implies that they are being careful not to exhaust their network capacity for FWA in exchange for phone traffic. I also agree the argument that FWA is likely to stay in areas where cable is unavailable, and cable companies will have "marketing claims" to compete better after their DOCSIS 4.0 upgrades are completed.
@Vektor Research "but I assumed that the C-band spectrum, being the upper-mid band, should have better performance"

The peak performance/capacity is mostly dictated by how wide the spectrum allocation is. VZ has 160Mhz width on average (200Mhz in a few markets) in Cband that can get about 2.4Gbps capacity per cell sector. To get 3.3Gbps, TMUS is aggregating 1.9/2.5Ghz with 225Mhz width and TMUS also has Cband and 3.4Ghz spectrum they haven't used yet. TMUS ultimately has more midband spectrum width. VZ does have more high band mmWave spectrum (very wide) but the range/penetration is so poor they aren't rolling out as widely as they first tried to, under 3M pops coverage compared to 250M for their midband end of next year (300M for TMUS end of this year). The Big 3 are using mmWave for mostly hotspots and high traffic areas like airports/stadiums and Times Sq type locations.

"there are concerns about capacity limits although both companies have reiterated that capacity is not an issue"

The upgrades will help and give some breathing room from preventing oversubscription but they still can only allow so many subs per sector, much lower than cable/fiber, is why VZ only expects 5M FWA subs or so and TMUS about 8M subs or so. And FWA is prioritized lower than phone traffic. 6G could at least triple capacity on paper given same 5G spectrum but that's more capex and potentially more debt.
Keep compounding the dividends on VZ.
Well written article. Thank you.
Vektor Research profile picture
@PortguyofVA thank you for your kind words.
VZ lead issue favorably commented on by EPA should boost stock. Concur VZ is a screaming BUY!
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