March 13, 2012
Welcome to the Stock of the Day for March 13, 2012. Can you hear me now? Good. Today, we're going to take a look at Verizon Communications Inc. (VZ), who is known for operating "America's largest and most reliable wireless voice and 3G network."
Company Overview: If you live in the United States, chances are you have heard of the massive rivalry between Verizon and AT&T Inc. However, many don't realize that Verizon started as an AT&T spinoff in 1984. Fast forward almost three decades later, and Verizon has emerged as a global force in the broadband and telecommunications industry. The company has diversified into a number of telecommunications services, including land line telephone and internet services, as well as one of the most advanced wireless networks on the planet.
Dividend Alert: On March 2, management announced that shareholders of record on April 10 would receive a dividend of $0.50 per share on May 1. This payment remains unchanged from previous quarters and represents a 5.1% yield. As it stands, Verizon's annual dividend yield is eighth highest in the industry.
Industry Breakdown: There are currently 26 companies in the domestic telecom industry, and Verizon outperforms most in several fundamental areas. In terms of market cap, Verizon is the second-largest in the industry. In addition, the company is ranked first in terms of earnings growth and fourth in terms of return on equity. The company's long-term growth rate is also better than average. However, the company is mediocre in terms of Price/Earnings to Growth ratio and sales growth. Verizon's main competitors are AT&T Inc. and Sprint Nextel Corp.; of these three, Verizon has the highest sales growth and gross margin.
Current Ratings: Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. For a year and counting, this stock has been a consistent "buy". However, the company's bottom line was hit in the fourth quarter, so VZ's fundamental grade is rather low. As it stands, Verizon is only strong in terms of return on equity, and has mediocre sales growth and earnings revisions. All of the other fundamental metrics, including earnings and operating margin growth, are D- or F-rated. The one thing that keeps VZ in "buy" territory is its strong level of buying pressure. This is a B-rated stock.
Bottom Line: This stock is currently a "buy," but if buying pressure changes, it could easily be downgraded to a "hold" or even a "sell."
Sound Off: What do you think about VZ? Are you a buyer at current prices? Let me know what you think by posting on our wall on Facebook.