There comes a time in the journey of a stock investor when the rollercoaster volatility of growth stocks no longer cuts it. Instead, they want the stability and the peace of mind that some stocks bring. And there’s hardly a stock that offers peaceful sleep as Verizon Communications Inc. (NYSE: VZ) does.
Source: Aaditya Hirachan
There are two things that the Verizon stock guarantees you: Stability and sizable dividend payout.
Verizon has a history of dividend payouts that have consistently increased going many years back. And with a current dividend yield of 4.8% and a payout ratio of only 48%, investors have no reason to fear a dividend cut. Even the company’s enormous debt is under control with its plentiful cash flow.
The rest of Verizon’s balance sheet also tells a story of stability, rather than growth. Total quarterly revenue, for instance, dropped by 1.8% to $34.1 billion year-on-year, while total annual revenue increased by 4.1% to $133.6 billion in the same period.
Source: Verizon
Business revenue also dropped by 3% year-on-year on the quarterly front, but gained 0.3% on the annual front at the same time. Adjusted earnings per share and consumer revenue, though, grew quarterly and annually from the previous year.
Source: Verizon
Verizon is one of the three telecom giants in the US. Although it faces fierce competition from the other two, there’s no fear of new competitors kicking them off the top three anytime soon. The reason is that the industry is infrastructure-intensive. Any potential competitor must have billions of dollars to invest, lose, and re-invest.
This oligopoly is a good thing for Verizon and its shareholders, as they won’t have to constantly look over their shoulders, other than to keep an eye on the other two competitions.
The continuing rollout of 5G also exposes the VZ stock to a huge potential upside. 5G on its own is packed full of possibilities, some of which we can’t even begin to imagine. And once 5G becomes mainstream and 4G becomes obsolete, the providers of the network are definitely going to benefit from it.
As mentioned, Verizon is not one to give you massive returns, but its consistent dividends is definitely a great reason to keep it.
Technical Analysis
At first glance nothing looked spectacular with Verizon when looking at it on the weekly chart. In fact, the stock looked rather all over the place. However, a shift to the monthly chart revealed that the stock may be at a point of reversal, having dipped below a support trendline with roots that go all the way back to 2008.
For all we know, this dip below the support trendline could be a mere late pullback which is common when trendlines are being redefined. So, to find out what exactly is going on, we take another look at the weekly chart.
What once looked a picture of incoherence now tells a story. A level that served as support at $52.6 – $54.0 has now turned to resistance. Unsurprisingly, it is the same drop that broke the support trendline that broke this support level.
Here’s the long and short of these: These are all telltale signs of a reversal. This could be the end of the 12-year uptrend for Verizon, and there’s no telling what would happen from here.
But not to be a prophet of doom, though. This may be a false breakout for all we know. We’ll have to see how things play out.
This potential downside, however, should not affect the fundamentals of Verizon.
