As posted on October 5th, Verizon Communications, Inc. (VZ: NYSE – $53.77) is a worthwhile choice for those conservative investors with a craving for current income. A household name for those who use their mobile services, New York-based Verizon is one of the world’s leading providers of communications, information, cloud computing and entertainment products and services. Created through the merger of Bell Atlantic and GTE in June 2000, Verizon subsequently purchased MCI, portions of Alltel Wireless and in February of 2014 closed on the remaining 45% interest in Verizon Wireless it did not own from Vodafone. Verizon acquired AOL and the Internet assets of Yahoo! in 2015 and 2016, respectively.
The company operates three reporting segments: Wireless, Wireline and Media. Wireless’ communications products and services include mobile voice and data services and equipment sales, which are provided to consumers, business and government. It is the largest wireless service provider in the United States as measured by retail connections and revenue and represents about 74% of Verizon’s aggregate revenues of $126 billion. The company is in the process of rolling out their 5G LTE network, which will be available to 98% of the U.S. population in more than 500 markets covering approximately 305 million people, including those in rural areas served by partners. The Wireline segment provides voice, data and video communications products and enhanced services including broadband video and data (FIOS), corporate networking solutions, cloud services, security and managed network services and local and long-distance voice services. The company provides these products and services to consumers in the United States as well as to carriers, businesses and government customers in over 150 other countries around the world. In 2017, Wireline revenues were $31 billion, representing about 24% of Verizon’s total revenues. In addition, Verizon has combined its acquired assets from Yahoo! and AOL to create Oath a new subsidiary with a diverse house of more than 50 media and technology brands that engages more than a billion people around the world.
Verizon seems poised for record performances both this year and next. To wit, Verizon reported second-quarter earnings of $1.20 a share, an impressive 25% jump from the year ago result on a solid 5.4% top-line advance. VZ Wireless reported a 5.5% increase in year-over-year revenues, and service revenues, which had been declining of late, grew 0.8% from a year ago during the second period. Total 2018 earnings should top $4.64 per share and $4.73 is on tap for next year. This blue-chip equity offers above-average appreciation potential three to five years out given its low valuation of 11 times estimated 2019 earnings. Positions should appeal to conservative and income-seeking investors as its $2.41 annual dividend, yielding 4.4%, serves to sweeten the pot.
In the interest of full disclosure, I maintain a position in Verizon Communications and hold it in some of my managed accounts.