Verizon Stock a Standout After Brexit
Verizon Communications Inc. (NYSE:VZ) has just come out of one of the largest labor strikes in U.S. history. The strike began during the middle of April and formally ended on June 22. But despite the strike action, Verizon stock has gained more than 18% year-to-date. In fact, considering the extent of the strike, Verizon has come out stronger than ever and VZ stock reflects this, having hit a new high of $54.73. Sure, you could say the company went up by a measly 0.5%—but few companies have as stable growth prospects and few stocks can deliver gains as reliably as Verizon stock, especially considering there is such a thing as a Verizon dividend.
Verizon stock was one of the few gainers on June 27, as most stocks fell on Brexit fears (the Dow Jones lost 1.5%).
In June, Verizon will pay out a quarterly dividend in the amount of $0.565 per share. Overall, this means the U.S. network provider will have paid out $2.26 on an annual basis. Given the current price of Verizon stock, the company offers a yield of approximately 4.13%. (Source: “Verizon,” Dividend.com, June 27, 2016.)
Verizon can afford the dividend because, strike or not, the company has experienced unprecedented growth so far in 2016, especially in the wireless business. Verizon is an example of the kind of ideal stock with which investors can face market turbulence, particularly the kind the Brexit has created.
The effects of the Brexit are longstanding and unclear; volatility will remain high. In this environment, the combination of a healthy dividend and strong utility presence makes Verizon a defensive stock. No wonder it was one of just two Dow components to gain on Monday. (Source: “Dow closes down more than 250 points at lowest since mid-March,” CNBC, June 27, 2016.)
Verizon can back its dividend because the company enjoys a leadership role within the North American communications landscape. That said, Verizon is also a force in Europe. If Verizon has a weakness, it’s that it has to offset the fact of lower demand for landline services. Indeed, Verizon must keep expanding the customer base in order to build revenue. That’s why it is pursuing Yahoo! Inc. (NASDAQ:YHOO).
Some might suggest that Verizon’s dividend is conservative, considering the company controls more than 33% of the American wireless market. (Source: “Telecoms open shop on Madison Avenue, but will brands buy?” TechCrunch, June 27, 2016.) In order to maintain the growth rates that allow it to deliver dividends year after year, Verizon wants to take a leadership role in developing 5G technology, the next big step in wireless communications. To that effect, Verizon has agreed to a partnership with Korean carrier KT to explore the basic technology to establish a global standard for 5G. (Source: “Verizon 5G efforts could leverage KT’s millimeter wave technology,” RCR Wireless News, June 27, 2016.)
If you have not heard of 5G, you’re not alone; it doesn’t really mean anything yet. It is whatever will follow 4G and will surely be faster still. But by being on top of the global standardization process, Verizon will have a major say in how the future of wireless communications will look. After all, 5G technology should be out by 2020.
In practical terms, though, Verizon has teamed up with Samsung to field test its 5G equipment and it expects to achieve some form of commercial deployment in 2017. (Source: “Verizon to Commercially Deploy 5G Wireless Networks in 2017,” Yahoo! Finance, April 22, 2016.)
And after all that, the premise for Verizon stock does not need fancy arguments. The company operates in a stable sector. Thanks to its leadership, it is growing in the wireless sector, even pioneering new technologies to extend growth into the next decade.
Ultimately, from an investor’s perspective, the dividend with its more than four-percent annual yield is the ultimate reassurance of a reliable return amid growing volatility.