In a previous post, a negative description of Verizon (VZ) is presented. Issues involve questions about the capabilities of the CEO as well as caution toward prospects for the rest of the business outside of the future implementation of 5G technologies. Since then, there has been reason for better perspective on the corporation’s overall situation; though research into its leader’s background supports an askance look at him.
If one is willing to risk his or her own money, a firm that is well-positioned for the rollout of 5G communications could be worth considering. All indications are that Verizon fits that description. Further, there are competitors that do not have their own mobile communication systems but rent or lease them: Comcast (CMCSA) is a Verizon customer. Additionally, federal regulators have approved the merger of T-Mobile (TMUS) and Sprint (S), as to potentially reduce the number of competitors (though several states are in opposition). Thus, unless something goes seriously wrong, Verizon should be well-positioned for the next two or three years.
Pertaining to what VZ shares are worth, the firm is a telecommunications provider, in a category that tends to be identified with lower risk and better stability. Similar to major or integrated oil companies and multinational conglomerates, investors may also look to them for income, meaning dividend payments. A dividend discount model is appropriate to the stock. Here is how my spreadsheet values VZ shares currently (closed at $60.53 on 11/7/19):
It says that, with the current total of yearly dividend payments of $2.46, and assuming a return on stocks consistent with that of the S&P 500 over the past decade, the market expects a perpetual increase of the dividend at a rate of just over 2.5% per annum. This is remarkably consistent with the payment’s Compound Annual Growth Rate (CAGR) of 2.71% based on data since 2009. It would take additional research to have a better notion of the company’s ability to sustain it.
If it cannot, there probably will be a negative effect for investors.
However, given what has been discussed, there is reason to suspect that the dividend can be increased at a rate consistent with the stock’s current price. Through the lens of future distributions, shares of VZ appear to be a fair value. They are not necessarily too expensive but might not amount to a get-rich-quick scheme.
If one is willing to risk his or her own money, a firm that is well-positioned for the rollout of 5G communications could be worth considering. All indications are that Verizon fits that description. Further, there are competitors that do not have their own mobile communication systems but rent or lease them: Comcast (CMCSA) is a Verizon customer. Additionally, federal regulators have approved the merger of T-Mobile (TMUS) and Sprint (S), as to potentially reduce the number of competitors (though several states are in opposition). Thus, unless something goes seriously wrong, Verizon should be well-positioned for the next two or three years.
Pertaining to what VZ shares are worth, the firm is a telecommunications provider, in a category that tends to be identified with lower risk and better stability. Similar to major or integrated oil companies and multinational conglomerates, investors may also look to them for income, meaning dividend payments. A dividend discount model is appropriate to the stock. Here is how my spreadsheet values VZ shares currently (closed at $60.53 on 11/7/19):
It says that, with the current total of yearly dividend payments of $2.46, and assuming a return on stocks consistent with that of the S&P 500 over the past decade, the market expects a perpetual increase of the dividend at a rate of just over 2.5% per annum. This is remarkably consistent with the payment’s Compound Annual Growth Rate (CAGR) of 2.71% based on data since 2009. It would take additional research to have a better notion of the company’s ability to sustain it.
If it cannot, there probably will be a negative effect for investors.
However, given what has been discussed, there is reason to suspect that the dividend can be increased at a rate consistent with the stock’s current price. Through the lens of future distributions, shares of VZ appear to be a fair value. They are not necessarily too expensive but might not amount to a get-rich-quick scheme.