Verizon Stock Analysis

Verizon Dividend Stock Analysis

Verizon Communications Inc. (VZ) is an integrated telecommunications company that provides wire line voice and data services, wireless services, internet services, and directory information. The company has a global reach and also provides network services to the federal government including various business lines, data services, and others. 

Verizon has a strong history of above average dividend payouts and stable stock values. Additionally, the company has increased its dividend every year for the past 15 years. For a full dividend history, check out the Verizon Investor Website.

Dividend Per Share

Verizon Dividend Per Share

Dividends Per Share increased 2.05% in 2020 from $2.44/share in 2019 to $2.49/share in 2020. This is consistent with the Verizon long term increases which have averaged 2.59% over the last 10 years. 

If this trend continues, we can expect Verizon to increase their dividend another 2% to 3% this year in the range of $2.54/share to $2.56/share.

Earnings Per Share (EPS)

Verizon Earnings Per Share (EPS)

From 2010 to 2020, Adjusted EPS has grown from $2.64/share to $4.90/share. While the general EPS trend is upwards, there is some volatility due to the GAAP Accounting rules. 

Under the GAAP Accounting rules, the Verizon Pension needs to be “Marked to Market” which means that the rise, or fall, in the pensions investments flow through to the quarterly earnings. This makes it very hard for average investors to value a company because the earnings are skewed by outside influences. 

Free Cash Flow (FCF)

Verizon Free Cash Flow (FCF)

From 2010 to 2020, Free Cash Flow (FCF) has increased from $16.9B to $23.5B. There is also some volatility in the Verizon FCF, and it is more pronounced than that volatility in the EPS. The good news is that the sharp decrease in FCF during the fiscal 2016 year was due to a change in how Verizon monetized device payment plan receivables – it is also good news that even during this period Verizon was able to increase their dividend payout. 

Shares Outstanding

Verizon Shares Outstanding

From 2010 to 2020, the number of shares outstanding has increased from 2.8B to 4.12B. While the increase is typically not something that you would like to see, it is primarily caused by acquisitions. For example, the large increase in 2013 was due to Verizon purchasing the remaining stake in Verizon Wireless from Vodaphone. 

Dividend Payout Ratio

Verizon Dividend Payout Ratio - Stock Analysis

From 2010, Verizon’s DPR has decreased from 73% to 51%. Like the other items we have looked at, there has been some volatility around the decreases. This is primarily due to one off events that have impacted the EPS. That being said, a 51% DPS is relatively stable and given the strong nature of the company, my belief is that the DPR will continue to decline in the future. 

Final Thoughts

I have owned Verizon stock on and off for the last 10 years or so and, truth be told, I wish I would have had the conviction to hold the entire time. It is a great company with a history of being a market leader in the telecommunication space. 

Currently, Verizon is trading at about 13 times forward earnings, making it a relative value vs the S&P 500 which is trading at roughly 25 times forward earnings. Verizon is also sporting a 4.34% indicated dividend yield making it attractive as well. 

Additionally, it was announced at the end of February that Warren Buffett and Berkshire Hathaway had invested roughly $8.6B in the stock (Full Article).