Is Verizon Communications (NYSE: VZ) a Good Value Investment?
The value case for Verizon Communications (NYSE: VZ) is simple. In essence; Verizon is cheap, it has a big footprint, and it makes a lot of money.
To explain, Verizon is the largest wireless carrier in the US with 153.97 million customers in 3rd Quarter 2018, Statista calculates. Moreover, that footprint is growing because Verizon had 148.87 million wireless customers in 3rd Quarter 2018.
More importantly, Verizon is making a lot of money off all those wireless customers. For instance, Verizon recorded a gross profit of $19.276 billion on revenues of $32.607 billion for 3rd Quarter 2018.
Verizon Communications (NYSE: VZ) is making a lot of money
In addition, Verizon records an operating income of $7.675 billion and a $4.924 billion net income for 3rd Quarter 2018.
Additionally, Verizon is generating a lot of cash from its business. For example, Verizon reported an operating cash flow of $9.811 billion and a free cash flow of $5.623 billion for 3rd Quarter 2018.
Finally, Verizon reported $2.538 billion in cash and short-term investments on 30 September 2018. Therefore, Verizon is apparently generating a lot of float off those wireless customers.
In detail, the float is the cash a company generates from regular subscription payments customers have to make. For instance, all those people who have to pay their bill month to keep wireless service.
Notably, the float is the term Warren Buffett invented for insurance premiums. In fact, insurance premiums were one source of cash Buffett tapped to build Berkshire Hathaway (NYSE: BRK.B).
Is Verizon Communications (NYSE: VZ) a cheap stock?
Value investors are interested in Verizon Communications (NYSE: VZ) because it is a cheap but cash-rich company. In fact, Verizon shares were trading at $57.10 on 9 January 2019.
In particular, Verizon is a cheap entertainment stock when compared to Disney (NYSE: DIS). Tellingly, Disney was trading at $112.39 a share on 9 January 2019. We can consider Verizon an entertainment stock because it distributes entertainment through cable TV, streaming video, and wireless.
Moreover, Verizon is a cheap mobile phone stock when compared to Apple (NASDAQ: AAPL). Comparatively, shares in Apple Inc. traded at $153.31 on 9 January 2019.
Verizon Communications (NYSE: VZ) is a Classic Value Investment
Verizon Communications (NYSE: VZ) is a mobile phone stock because it provides the signal wireless signal iPhones and other devices need to operate.
Thus, buying Verizon is a classic value investing strategy. The strategy is to ignore the popular stocks Mr. Markets loves and look for the unsexy companies that provide the infrastructure the market favorites need to operate.
For instance, an iPhone is just a worthless hunk of metal, glass, and plastic without Verizon’s wireless signal. In addition, Verizon provides the internet, cable, and wireless service that devices Disney and Netflix (NASDAQ: NFLX).
SHowever, Verizon costs less than Netflix (NADAQ: NFLX); which was trading at a ridiculous $320.24 a share, on 9 January 2019. Therefore, Verizon is a bargain investment in an overpriced sector.
Verizon Communications (NYSE: VZ) is also a good dividend stock
Finally, Verizon Communications (NYSE: VZ) is also a pretty good dividend stock. For example, Verizon shareholders enjoyed a dividend yield of 4.22%, an annualized payout of $2.41 and a payout ratio of 51.7% on January 9, 2018.
To add icing to the cake, Verizon shareholders have also enjoyed 12 years of dividend growth, Dividend.com reports. To elaborate the next Verizon dividend will be 60.3¢ on 1 February 2019.
Plus, Verizon displayed good dividend growth over the past year. For instance, Verizon paid a 57.7¢ dividend on 1 August 2017. That dividend grew to 59¢ on 1 November 2017 and 60.3¢ on 1 November 2018.
Therefore, Verizon’s cash dividend grew by 2.3¢ in a year. Hence, Verizon is a great dividend stock.
Surprise Verizon Communications (NYSE: VZ) is a good income stock
In the final analysis, Verizon Communications (NYSE: VZ) is a good income stock because of the dividend.
If you are looking for a solid but growing value investment that pays a good dividend, Verizon is a great choice. For example, Verizon’s revenues have grown for the last six quarters. Notably, Verizon reported a revenue growth rate of 2.18% for 3rd Quarter 2018.
I consider Verizon a value investment for the 21st Century. If you are looking a dividend stock with strong growth potential Verizon is a great candidate.
Investors, that want to profit from the popularity of mobile phones and wireless technology should investigate Verizon Communications. Since most of us cannot live without our phones, we might as well make money off wireless. Owning a few shares of Verizon Communications Inc. (NYSE: VZ) is a great way to do that.
