It sold DirecTV to a private equity firm in August 2021 and spun off Warner Media to merge with Discovery Communications and help create Warner Bros. Both actions changed the fundamental makeup of AT&T’s business, reverting the company back to its more telecom-focused state. Certain financial information included in Dividend.com is proprietary to Mergent, Inc. (“Mergent”) Copyright © 2014. Reproduction of such information in any form is prohibited. This articles highlights and explains 10 of the most important concepts that dividend… Oil and gas infrastructure company Enterprise Products Partners is first on the list,…
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- In addition, Verizon slashed its non-GAAP adjusted EPS guidance for this year from $5.40-$5.55 to $5.10-$5.25.
- That’s down from the $34.24 billion generated one year earlier.
- The reason being, that around that period Verizon’s free cash flow per share fell significantly and haven’t fully recovered since.
That’s down from the $34.24 billion generated one year earlier. Earnings per share, meanwhile, are expected to fall from $1.17 to $1.16. If that comes to fruition, it would translate to net profits dropping from $5.02 billion to $4.89 billion.
Why Did Verizon Stock Crash In July? What’s The Future Outlook?
Vestberg’s comments in a “Mad Money” interview came after Verizon held an investor day earlier Thursday, during which it laid out its strategy for the years ahead. It’s targeting growth of at least 4% for service and other revenue in 2024. However, the two are in perfect step when you look at it from a dividend yield perspective.
Following the sell-off, Truist now has a similar price-to-earnings ratio and dividend yield to AT&T and Verizon, but the business has much greater prospects for recovery than the two telecoms. Despite their generous dividend yields and cheap valuations, AT&T and Verizon are burdened with huge debt loads, partly a result of poor acquisitions, that have restricted their financial flexibility and ability to grow. AT&T and Verizon are both attractively valued based off of free cash flow, but the former has a slight advantage. Both stocks are also cheap based off of earnings, with AT&T having a slight advantage as well. The first point I would like to make relates to prospects for top line growth for both AT&T and Verizon. Both telecoms face saturated market conditions in their core businesses, but they do see some momentum in their broadband segments.
What looks more problematic, however, would be cash flows. Although EBITDA has been robust, especially this year, operating cash flow has not. Yes, for the first half of this year, operating cash flow is higher than it was at the same time in 2022. But when we adjust for changes in working capital, we see a very disturbing trend.
If you’re screening for high dividend-yielding stocks, it’s likely Verizon (VZ -0.78%) and AT&T (T -0.62%) have come to your attention. Verizon is currently yielding an eye-popping 7%, and AT&T yields slightly less at 5.8%. The stock sells off, further exaggerating its yield, and creating a vicious cycle that only ends when the dividend is finally cut (or worse, suspended). A stock’s dividend is obviously just one factor that matters to investors. Other factors such as valuation, free cash flow payout ratio and the safety of the dividend also matter and must be taken into account before deciding which dividend stock offers the best potential. Investors don’t look to telecommunications firms like Verizon for eye-popping revenue growth.
- This is the 16th consecutive year Verizon’s Board has approved a quarterly dividend increase.
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- On an adjusted basis, it was quite a bit lower at $9.03 billion.
- But we are seeing some weakness now and cash flows have long been on the decline.
- Verizon has not given a free cash flow forecast for FY 2022, but I recently estimated that the telecom could achieve $17-19B in free cash flow this year.
- Verizon Communications CEO Hans Vestberg painted an optimistic future picture Thursday, telling CNBC’s Jim Cramer the telecom giant has “more growth opportunity than we’ve ever had before.”
So I don’t see the two companies as being wildly different. But I do see AT&T as having the greater capacity to pay out more questrade fx to shareholders. Among the telecoms is Verizon Communications (VZ -0.78%), the second-largest provider behind AT&T.
The Ten Commandments of Dividend Investing
Prior to this date, the stock was trading as Bell Atlantic. The dividends have been adjusted to account for any stock splits that have occurred. In Wednesday trading, Verizon Communications shares are currently off about 0.2% on the day. The market appears skeptical of this move, however, it gives Verizon a significant edge over its peers.
You can also calculate the payout ratio using free cash flow. Of course, it’s always good to check both methods, since different reporting methods can be deceiving. On the other hand, if both the earnings and free cash flow methods check out, the company is likely in solid shape. Assuming — based on the breakdown above — that increased Treasuries rates caused the yield of Verizon’s stock to rise, does that make Verizon a screaming buy with its inflated dividend? While the dividend yields may be enticing, the long-term performance of the broader market is just a better place to invest money.
The reason why debt load increased so much this year was Verizon’s massive spend on 5G spectrum. The reason being, that around that period Verizon’s free cash flow per share fell significantly and haven’t fully recovered since. Just this brief setup is enough for many retail and cryptocurrency broker canada institutional investors alike to give Verizon a pass in favor of a high growth cloud, electric vehicles, or semiconductors name. Both Verizon and AT&T (T) also did capital allocation mistakes in the past, with their acquisitions of AOL and Time Warner & DirecTV, respectively.
Verizon Communications Inc (NYSE:VZ) Dividend History
Enter your email address below to receive the DividendStocks.com newsletter, a daily email that contains dividend stock ideas, ex-dividend stocks, and the latest dividend investing news. The high debt load does not appear to be a problem at this point in time, while the dividend yield is at one of its highest levels. In a nutshell, it appears that the saying that it’s always darkest before the dawn could actually hold true for Verizon at this point in time. Thus, by going all-in on both wireless and fixed networks, Verizon creates significant new revenue streams while also solidifying its leading positioning in its core business. A core business that generates significantly higher return on capital than its two major peers in the United States. In addition to its stronger positioning, Verizon’s current dividend yield of around 5% hasn’t been that high for the past decade and has been higher only a few times during the past 20-year period.
Should the Federal Reserve slash rates to a lower level and leave investors no longer able buy high-yielding Treasuries, Verizon’s stock might see a surge of renewed interest, sending the price up and the yield down. While Verizon is in good shape, investors must watch the payout ratio. That said, free cash flow can be volatile, so investors should expect a little more variance.
Dividend outlook
The first, as I mentioned earlier, was the increase following the Vodafone deal and the second was during this calendar year. Increasing debt load is one area of concern for many potential shareholders. The high debt level could easily lead to the perception of buying a slow-growth business that is struggling to survive. Of course, this could not be further from the truth in my view. Telecom carriers, which are quite limited in their growth opportunities, have been punished.
Netcials reports section helps you with deep insights into the performance of various assets over the years. We are constantly upgrading and updating our reports section. The company is streamlining the business, cutting costs, and building capital in response to tighter capital requirements resulting from the regional banking crisis.
Earnings valuation
He pointed to its recent acquisition of value wireless brand TracFone and its large purchase of C-Band spectrum in early 2021, a move to help build out 5G in the U.S. The number of broadband connections for the company grew from 6.65 million to how to show remote work experience on your resume 7.90 million, with Fios Internet connections jumping from 6.20 million to 6.74 million. Wireless retail prepaid phone connections have actually dropped in recent years. Due to comparability issues, we don’t have a reading for this for 2020.
Let’s find out if investors have a reason to worry about the dividend payout of these two. Discover dividend stocks matching your investment objectives with our advanced screening tools. Telecom stocks tend to be recession-proof as smartphones and data are essential services. In other words, AT&T and Verizon should be thriving in the current environment, but that’s not what’s happening.