Verizon: Telecom Giant With an Attractive Yield and Healthy Payout Ratio
Verizon was formed in 2000 when telecom giants Bell Atlantic and GTE merged in a $52 billion transaction. But the company's predecessors' roots trace back to the late 19th century when Alexander Graham Bell patented the telephone and founded AT&T.
With the largest landline network in America, Bell's company had an effective monopoly over the phone system until the government forced the firm to break up in 1984. AT&T divested seven regional operating companies, resulting in the creation of Bell Atlantic.
Initially, Bell Atlantic provided telephone service in just six states. In the following decades, the firm executed a series of acquisitions, mergers, and joint ventures to expand its business nationwide.
This consolidation set the stage for the current-day Verizon Wireless service. In 1999, Bell Atlantic and London-based Vodafone formed a joint venture combining their U.S. wireless assets to create a national footprint and single brand. After adding GTE's operations in 2000, Verizon Wireless became the nation's largest wireless company.
Verizon in 2014 bought out Vodafone's 45% stake in the joint venture for $130 billion, executing one of the largest transactions in business history. This deal cemented the firm's commitment to wireless services, which generate nearly all of Verizon's profits today.
Despite the substantial changes the communications world has undergone due to the mobile internet, Verizon and its predecessors have paid uninterrupted dividends since Bell Atlantic's formation in 1984. The firm has raised its dividend every year since 2007, too.
Verizon's key to success has been delivering reliable wireless and wireline services over the best communications network in the country.
The company invests more than $15 billion annually to increase the capacity and reliability of its wireless network. Thanks to these massive investments in capital equipment and spectrum licenses, Verizon typically delivers industry-leading wireless reliability, speed, and network performance.
This commitment to quality has earned the trust of millions of consumers and businesses who depend on Verizon's service daily, providing a recurring, recession-resistant cash flow stream to support and enhance the firm's wireless network.
With smartphone adoption widespread and new customer growth harder to come by, potential new entrants would struggle to amass the subscriber base needed to fund a nationwide wireless network and acquire spectrum licenses, effectively keeping them locked out of the market.
For these reasons, Verizon, AT&T, and T-Mobile generate almost all of the U.S. industry's revenue and seem likely to continue dominating. Competition between these carriers is still intense, but Verizon runs its business conservatively to ensure it can remain a leader without jeopardizing its dividend track record.
That means maintaining a BBB+ credit rating and retaining a healthy amount of cash flow after paying dividends. This provides Verizon with the financial flexibility to invest in next-generation network technologies such as 5G and fund other capital-intensive projects as needed.
Overall, Verizon seems likely to remain a reliable income stock. The company's scale, hard-to-replicate network assets, mission-critical services, brand recognition, and massive subscriber base should remain important competitive advantages.
With the largest landline network in America, Bell's company had an effective monopoly over the phone system until the government forced the firm to break up in 1984. AT&T divested seven regional operating companies, resulting in the creation of Bell Atlantic.
Initially, Bell Atlantic provided telephone service in just six states. In the following decades, the firm executed a series of acquisitions, mergers, and joint ventures to expand its business nationwide.
This consolidation set the stage for the current-day Verizon Wireless service. In 1999, Bell Atlantic and London-based Vodafone formed a joint venture combining their U.S. wireless assets to create a national footprint and single brand. After adding GTE's operations in 2000, Verizon Wireless became the nation's largest wireless company.
Verizon in 2014 bought out Vodafone's 45% stake in the joint venture for $130 billion, executing one of the largest transactions in business history. This deal cemented the firm's commitment to wireless services, which generate nearly all of Verizon's profits today.
Despite the substantial changes the communications world has undergone due to the mobile internet, Verizon and its predecessors have paid uninterrupted dividends since Bell Atlantic's formation in 1984. The firm has raised its dividend every year since 2007, too.
Verizon's key to success has been delivering reliable wireless and wireline services over the best communications network in the country.
The company invests more than $15 billion annually to increase the capacity and reliability of its wireless network. Thanks to these massive investments in capital equipment and spectrum licenses, Verizon typically delivers industry-leading wireless reliability, speed, and network performance.
This commitment to quality has earned the trust of millions of consumers and businesses who depend on Verizon's service daily, providing a recurring, recession-resistant cash flow stream to support and enhance the firm's wireless network.
With smartphone adoption widespread and new customer growth harder to come by, potential new entrants would struggle to amass the subscriber base needed to fund a nationwide wireless network and acquire spectrum licenses, effectively keeping them locked out of the market.
For these reasons, Verizon, AT&T, and T-Mobile generate almost all of the U.S. industry's revenue and seem likely to continue dominating. Competition between these carriers is still intense, but Verizon runs its business conservatively to ensure it can remain a leader without jeopardizing its dividend track record.
That means maintaining a BBB+ credit rating and retaining a healthy amount of cash flow after paying dividends. This provides Verizon with the financial flexibility to invest in next-generation network technologies such as 5G and fund other capital-intensive projects as needed.
Overall, Verizon seems likely to remain a reliable income stock. The company's scale, hard-to-replicate network assets, mission-critical services, brand recognition, and massive subscriber base should remain important competitive advantages.
