Should I buy Verizon Communications shares after a recent dip?

by

Verizon Communications Inc. (NYSE: VZ) shares have weakened from $51.77 to $38.63 since the beginning of July 2022, and the current price stands at $39.47.

Verizon raised its quarterly dividend by 2% this month, and shares of this company could provide strong returns for long-term investors.

Verizon raised its quarterly dividend by 2%

Verizon is a major American telecommunications company, currently the second largest in the country, just behind AT&T Inc. (NYSE: T)

Even though the company’s business continues to perform well, the share price of Verizon has collapsed this week to a new 6-year low of $38.63.

The current share price stands at $39.47, which is attractively valued based on its earnings, second quarter performance, future prospects, and dividend.

Verizon delivered excellent wireless volumes during the second quarter, with 430,000 net adds, including 227,000 postpaid phone net adds, which marked its third consecutive quarter exceeding 200,000 wireless phone net adds.

The company’s management updated its guidance for the 2022 fiscal year, and it reported that it expects wireless service revenue to grow between 8.5% to 9.5%, while the earnings per share should be in the range of $5.10 to $5.25 ( the prior guidance was $5.40-5.55).

Last fiscal year, Verizon increased its total revenues by approximately 4%, rising from $128,29 billion in the 2020 fiscal year to $133,61 billion in the 2021 fiscal year. The situation with profit was even better, and earnings per share increased from $4.30 in the 2020 fiscal year to $5.32 in the 2021 fiscal year.

Given that the company continues to grow fairly, consistently and is expected to continue to do so in the future as well, its current price does appear very tempting.

Another positive information is that the board of directors declared a $0.6525/quarterly share dividend this month, which represents an increase of 2% compared with a prior dividend of $0.6400. The dividend will be payable on November 01 to stockholders of record as of October 06, 2022.

The dividend yield is above 6% at the current share price, and for investors looking for a high but reliable dividend, with the prospect of single-digit growth going forward, this stock may be a good choice.

Verizon’s business model is relatively resilient versus recessions, as demand for phone services isn’t overly cyclical, and the company continues to have strong cash flow, which remains an important figure supportive of its current dividend payout.

Verizon shares are currently trading at a “multi-year low,” under eight times forward P/E, at less than four times TTM EBITDA, which also proves that Verizon is currently quite undervalued.

Technical analysis

Verizon’s share price has weakened more than 25% after reaching the highest level in 2022 of $55.51 on April 21, and the risk of further decline still persists.

The price is still moving below the 10-day moving average, indicating that the bottom is still not reached. Despite this, shares of this company could provide strong returns for long-term investors.

Data source: tradingview.com

The current support level stands at $38, while $46 represents the first resistance level. If the price falls below $38, it would be a “sell” signal, and we have the open way to $35 or even below. Conversely, if the price jumps above $46, the next target could be $50.

Summary

Even though the company’s business continues to perform well, the share price of Verizon has collapsed this week to a new 6-year low of $38.63. The dividend yield is above 6% at the current share price, and this stock may be a good choice for investors looking for a high but reliable dividend.

The post Should I buy Verizon Communications shares after a recent dip? appeared first on Invezz.

Related Posts