Verizon: Who Will Win the 5G Race?

Verizon Communications is the second-largest telecommunications company by revenue in the U.S.; the largest being AT&T. The firm’s biggest business segment by far is Wireless (69% of total revenue).

Verizon’s recent history

Verizon recently made three strategic billionaire acquisitions. In 2013, it bought the remaining 45% of its wireless business from Vodafone for $130 billion. This was one of the biggest acquisitions ever made. Two years later it acquired AOL for $4.4 billion. In 2017, it was the turn of Yahoo Inc., for $4.8 billion. Verizon’s CEO stated that one of the reasons behind these last two acquisitions was their huge combined user base (more than 1 billion users): the company intends to create a new video-streaming platform to offer to them.(1)

Verizon’s financials

Verizon’s revenue has grown by around 35% in the last 10 years.

As its low annual revenue growth rate shows, the company is in the maturity stage of its life cycle.

As shown in the chart below, the company’s EBIT has been growing in the last 10 years. The telco is also posting a very high operating margin of 22% (ttm).

Verizon’s stock performance

In the last 12 months, Verizon’s stock price has gone up by around 22%.

Despite its good performance, the telco has underperformed the S&P 500 index.

But at the same time, it has outperformed its main competitor, AT&T.

Verizon: investing strategies for 2019

Taking into account its maturity stage, its low price volatility and its high dividend yield (4.18% as of November 9, 2018) (2), I think that Verizon is a good stock for investors interested in dividend stocks. The company’s future depends on its ability to win the 5G (fifth generation of cell phone communications) development and spread race. Its competitors are all racing hard too. For example, T-Mobile and Sprint are joining forces with a merger in order to get the scale needed to compete with the two U.S. telco giants: Verizon and AT&T.

Trivia

The company’s name is a combination of the Latin word “veritas”, meaning truth, and “horizon”. These two words define the company’s values. (3)

What do you think about Verizon’s future? Let me know in the comment section below.

The Walt Disney Company: Investing Strategies for 2019.

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Check out my book: A Beginners’ Guide to Stock Investing.

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References

1. https://variety.com/2017/digital/news/aol-yahoo-close-mid-june-verizon-lowell-mcadam-1202440050/. [Online]

2. https://it.investing.com/equities/verizon-communications. [Online]

3. https://moneyinc.com/20-things-you-didnt-know-about-verizon/. [Online]

4. https://variety.com/2017/digital/news/aol-yahoo-close-mid-june-verizon-lowell-mcadam-1202440050/. [Online]

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