On a down Tuesday for U.S. equities, Verizon (VZ, Financial) saw its stock price rise by 2.75%, despite a more than 2% decline in the S&P 500 index.
Investors speculate that Verizon is about to announce a dividend raise. Analysts at Morgan Stanley predict that Verizon will declare this increase on Thursday, Sept. 5. They anticipate a $0.05-per-share annual hike, bringing the quarterly dividend to nearly $0.68 per share. Verizon's dividend history shows consistent annual increases, though typically small. The most recent hike, declared last September, was just over $0.01 per share. Currently, Verizon's dividend yield is around 6.3%.
Verizon (VZ, Financial) can afford this increase due to its robust cash flow from millions of subscribers. Its cash dividend payout ratio is under 80%, suggesting the dividend is well-funded and sustainable. As of the latest data, Verizon's stock is priced at $42.93. The stock has a market cap of approximately $180.71 billion and a price-to-earnings (PE) ratio of 16.08. This indicates a valuation that aligns with the company's current earnings performance.
According to GuruFocus, the GF Value for Verizon is estimated at $40.35, making the stock "Fairly Valued". This allows investors to gauge whether the current stock price aligns with its intrinsic value. For more details, visit the GF Value page.
However, it's important to note the warning signs: Verizon has an Altman Z-Score of 1.18, placing it in the distress zone, which implies a possibility of bankruptcy within the next two years. On the growth front, the company's revenue growth has slowed down over the past 12 months, but there are positive signs such as an expanding operating margin and a Beneish M-Score indicating that the company is unlikely to be manipulating its earnings.
In conclusion, while Verizon (VZ, Financial) has shown strong cash flow and a robust dividend payout, investors should be mindful of the company's financial health and growth prospects. The stock is fairly valued according to GF Value, making it a potentially stable investment in the telecommunications sector.
