Shares of Verizon (VZ) broke out of a flat base, reaching a buy point of 43.42 in Tuesday’s trading. This follows the company’s recent announcement that it raised its quarterly dividend.
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The new dividend is 67.75 cents per share, up from 66.5 cents. The next dividend will be paid Nov. 1 with an ex-dividend date of Oct. 10.
With an annualized 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 appealing 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.
Second-quarter earnings, announced July 22, were disappointing. While earnings per share of $1.15 met expectations, revenue of $32.8 billion fell short of analysts’ estimates of $33.1 billion. This shortfall came despite higher-than-expected wireless postpaid subscriber growth, with the addition of 140,000 customers in the quarter.
Shares fell 6% on the results. But the stock has been recovering since then.
The anticipated 5G boom has yet to significantly benefit Verizon’s wireless business, which has not seen a meaningful revenue increase from 5G smartphone users. The company now expects this segment to gain momentum in 2025.
Verizon Makes Splash With Frontier Deal
Verizon certainly hopes convergence in the industry could offer growth opportunities. On Sept. 5, the company made a big splash announcing a $20 billion acquisition of Frontier Communications (FYBR).
Verizon says the deal, set to expand the company’s fiber network, will drive 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 in late 2025.
Verizon reported earnings per share of $4.71 for 2023, but earnings are expected to decline to $4.58 this year before stabilizing at $4.69 in 2025, according to IBD MarketSurge.
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