Tuesday January 17, 2012
by Roger Conrad, editor Utility ForecasterMoney is the critical element for success in the rapidly evolving communications business. And few have more of it than
Verizon Communications (
VZ), our latest income spotlight stock.
The company spent $5.482 billion for network expansion, upgrades and spectrum in the third quarter of 2011 alone.
And with each passing day, Verizon is extending its lead over rivals in reliability, capacity and speed, including the rapid rollout of fourth-generation (4G) wireless long-term evolution (LTE) technology.
The company leads in US wireless customers and, more importantly, it has more post-paid contract customers than any of its competitors. And more than half of them have smartphones.
Verizon has consistently raised its generous dividend. And there’s more to come with third-quarter free cash flow covering the payout by a 3.4-to-1 margin. Its 30-year debt yields barely 4% to maturity, the industry’s lowest cost capital.
Verizon has agreed to pay four cable television giants a total of $3.9 billion for currently unused wireless spectrum, with the parties also becoming agents to sell each others' products and services.
The FCC and/or Federal Trade Commission could block the deal. But with or without this deal Verizon’s money power assures growing revenue, earnings and dividends for 2012 and almost surely well beyond.
And the stock is still trading a third lower than in the late 1990s, when it was a far less valuable company. Verizon is a buy up to 40 for those who don’t own it.
Learn more about this financial newsletter at Roger Conrad's Utility Forecaster.
