Shares of Verizon (VZ - Free Report) popped after the market fought back from another brutal week on Friday. This climb came after the Dow drop 10% on Thursday alone, for its worst day since 1987. Despite the volatility, it might be time for investors to think about buying Verizon stock for its solid dividend yield, as it races toward its 5G future.
Verizon is a wireless communication powerhouse that continues to play a vital role in the connectivity and digitalization of the U.S. economy. Verizon, like rival AT&T (T - Free Report) and other telecom firms, is working to roll out the next-generation of wireless. Under CEO Hans Vestberg, Verizon has also focused on various cost-cutting measures to help it ramp up its 5G push, which requires a large amount of capital spending.
VZ closed fiscal 2019 on a high note, despite falling short of our Q4 earnings estimates. The firm recorded its most fourth quarter wireless adds in six years. It also increased its cash flow and saw its full-year revenue climb nearly 1%. “Our 5G footprint continues to grow as we lead this era of transformational change by building these next-generation networks the right way,” Verizon’s CEO said in prepared remarks.
Looking ahead, our current Zacks estimates call for VZ’s fiscal 2020 revenue to climb 2.3% and another 1.3% in 2021. At the bottom end of the income statement, the telecom firm’s adjusted FY20 earnings are projected pop nearly 3% to $4.95 a share, with FY21 expected to come in another 3.8% higher.
Verizon has seen some mixed earnings estimate revision activity recently, amid the market uncertainty. This helps it hold a Zacks Rank #3 (Hold). But the firm sports a “B” grade for Growth in our Style Scores system and is part of an industry that rests in the top 40% of our more than 250 Zacks industries.
VZ is currently trading at a solid discount compared to its industry at 10.3X forward earnings, against the Wireless National’s 16.2X average. Meanwhile, Verizon’s dividend yield rests at 4.54% at the moment. This marks a strong premium against the 10-year U.S. Treasury’s 1.0%, as well as the S&P 500’s average yield of 2.09%—which is based on the SPDR S&P 500 ETF Trust (SPY - Free Report) .
The Dow, S&P 500, and the Nasdaq all jumped over 9% Friday to help try to recover some losses from a rough week. The positivity came after President Trump officially declared a national emergency and laid out plans alongside business and healthcare leaders for steps to curb the spread of the novel coronavirus.
Verizon stock jumped 5.8% during regular trading Friday to close the day at $54.17 a share. This puts it about 13% off its 52-week highs. Clearly, investors should expect continued volatility, but the 11-year bull market ended quickly and now might be time for longer-term investors to think about buying stocks.
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