Owning Verizon With 6.5% Yield in Market Drop

24/7 Wall St. Insights

• If the market continues to drop, Verizon Communications Inc. (NYSE: VZ) stock will decline less, if at all.
• It also has among the most attractive yields across America’s large companies.

Verizon Communications Inc. (NYSE: VZ) shares are flat in a market in which the S&P 500 could soon be down 10% and the Nasdaq further. Even if the market falls more, this could still be true. Verizon has a rock-hard 6.49% yield, revenue likely to remain strong, good cash flow, and an impressive balance sheet.

Verizon was not a good stock to own during the recent market rally. The S&P 500 has been 28% higher in the past two years, while Verizon has been down 8%. No one has expected a strong surge in Verizon revenue, and net income has not been expected to move much.

In the second quarter, Verizon’s revenue rose only 0.6% to $32.8 billion. Net income fell 1.3% to $4.7 billion. Interest expenses were $1.7 billion. Cash and cash receivables were $2.4 billion. Wireless licenses, a sign of health, were $156.3 billion.

Morningstar recently pointed out, “In the wireless business, the firm holds roughly 40% of the US postpaid phone market, about a third greater than AT&T or T-Mobile. Leading scale enables Verizon to generate the highest margins and returns on capital in the industry.”

Verizon’s cash flow is solid enough to return $11 billion to investors in 2023, about 60% of free cash flow. That is among management’s most important philosophies, and it has been the case for years.

If the market continues to drop, Verizon’s stock will decline less, if at all. It is also among the most attractive yields across America’s large companies.

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