One of the leading wireless carriers in the U.S.,Verizon Wireless of Verizon Communications Inc. (VZ - Analyst Report) recently announced hefty dividend returns to its stake owners. The company will payout $7 billion in dividend on Jun 25. The company’s current dividend return strengthens its market value and reflects its strong growth prospects within the wireless industry.
Verizon Wireless, a joint venture between Verizon and Vodafone became the nation's largest wireless service provider followed by AT&T, Inc. (T - Analyst Report) and Sprint Nextel Corp. (S - Analyst Report) after acquiring Alltel Wireless Corp. in 2009. The dividend announcement follows speculations regarding Verzion buying out the remainder of the stakes (45%) from Vodafone Group Plc (VOD - Analyst Report).
Although nothing has been confirmed by both the companies, market rumors suggested that Verzion was less likely to pay out a dividend this time. Previously, Verizon Wireless paid out $8.5 billion in dividend to its parent companies – Verizon Communications and Vodafone – in the fourth quarter of 2012. Overall, the company made a total of $18.5 billion in dividend payment last year.
The company has a strong foothold in the wireless business and continues to capture additional market share through an aggressive deployment of the 4G Long Term Evolution (LTE) network. This would lead to improved operating and capital efficiencies. The company is leading the industry in terms of 4G deployment.
As of Jan 22, 2013, it covered 476 markets and more than 273 million people (nearly 89% of the U.S. population). Verizon expects to convert the entire nationwide 3G footprint to 4G by this year end. Verizon introduced the in-home wireless broadband service “HomeFusion Broadband” based on LTE technology in some rural and remote homes, which do not have access to digital subscriber line or cables.
However, persistent erosion in access lines, uncertain returns from investments, iPhone subsidies and intense competition from cable companies and other alternative service providers are risks to the stock.
Verizon currently has a Zacks Rank #2 (Buy).