Shares of Verizon (VZ) broke out of a flat base to reach a buy point of 43.42 in Tuesday’s trading. This follows the company’s recent announcement that it was raising its quarterly dividend.
↑
X
When market conditions are bad, this investment strategy can be a game changer
The new dividend is 67.75 cents per share, up from 66.5 cents. The next dividend will be paid on November 1, with an ex-dividend date of October 10.
With an annual yield of 6.2%, Verizon is one of the highest dividend payers in the S&P 500 and a leader on IBD’s Dividend Screen. As a mature company with an established telecommunications network, Verizon is an attractive choice for conservative investors seeking steady income.
However, Verizon’s mature business model offers limited growth potential. The wireless industry has slowed and the company faces stiff competition from rivals such as AT&T (T), T-Mobile (TMUS) and other companies.
The company’s second-quarter earnings, announced on July 22, were disappointing. While earnings per share of $1.15 met expectations, revenue of $32.8 billion fell short of analyst estimates of $33.1 billion. The shortfall came despite stronger-than-expected growth in postpaid wireless subscribers, which added 140,000 customers in the quarter.
Shares fell 6% on the results. But the stock has since recovered.
The expected 5G boom hasn’t yet significantly benefited Verizon’s wireless business, which hasn’t seen meaningful revenue growth from 5G smartphone users. The company now expects the segment to gain momentum in 2025.
Verizon impresses with Frontier deal
Verizon is certainly hoping that industry convergence can provide growth opportunities. On September 5, the company made a big splash by announcing a $20 billion acquisition Border communication (TERMS AND CONDITIONS).
Verizon says the deal, which is intended to expand the company’s fiber network, will boost revenue and EBITA growth. However, reactions to the deal have been mixed, with analysts questioning its potential to meaningfully improve coverage and synergies for the company. The deal is expected to close by the end of 2025.
According to IBD MarketSurge, Verizon reported earnings per share of $4.71 for 2023, but earnings are expected to fall to $4.58 this year before stabilizing at $4.69 in 2025.
YOU MAY ALSO LIKE:
The four pillars of the IBD methodology
Stock Market Risk Management: How Much Money Should You Invest?
IBD Live: Learn and Analyze Growth Stocks with the Pros
