Published Thu, 13 Jun 2019 15:09:17 -0400 on Seeking Alpha
As my previous investment thesis has highlighted, Verizon Communications (VZ) doesn't support a lot of upside to the stock when the dividend yield touches 4%. The stock is back up to $57 where the dividend yield dips to 4.2%, capping any likely gains in the short term, while 5G offers the potential home-run the stock needs.
Image Source: Verizon website
4% Dividend Yield
Due to a competitive domestic wireless market, Verizon has been unable to grow earnings in any meaningful way lately. For this reason, the dividend hikes are rather meager.
For the last decade, Verizon hasn't seen the dividend tick below 4% for any meaningful time period. With an annual payout of $2.41 per share, the dividend yield hits 4.0% at $60.25.
Data by YCharts
A 4% dividend yield just doesn't support the risk in the sector. The total return for Verizon since the yield originally dipped into the 4% range about five years has far trailed the S&P 500 index. Verizon has generated a 46% total return while the S&P 500 is up at 64%.
Data by YCharts
Another part of the problem is that Verizon remains far too expensive in comparison to AT&T (T). My previous research made it clear that the equation would need to change before Verizon was able to rally and make it below the 4% dividend yield.
As the world pushes forward on mobile 5G development, Verizon stands to benefit from a fast adoption in the U.S. The lingering T-Mobile (TMUS) attempt to purchase... Read more
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