We live in a highly digital world where data is the lifeblood and telecom companies provide the lifelines. There are more Internet users than ever before, and in 2022, Americans gobbled up over half a terabyte of data on average, asserts Rida Morwa, editor of High Dividend Opportunities.
In 2023, websites and web services are worlds apart from the 1990s, with significant emphasis on data-hungry aesthetics, visuals, and graphics, This shift is irreversible, and with the onset of the digital revolution, we will be consuming more data from now on.
Verizon Communications (VZ) is a leader in the American telecom industry and a solid dividend steward. In 2022, VZ delivered its 16th consecutive yearly dividend increase, and its current $0.6525/share quarterly payment calculates to a healthy 6.4% annualized yield.
VZ has consistently maintained the highest profit margins among the major U.S. telecom players. While VZ's service comes at a higher price than the competition, consumers pay the price for its network reliability.
According to RootMetrics' recent report, Verizon was the winner in the category of 5G reliability for the third straight 6-month period. This is one of the reasons for the company's strong pricing power.
VZ also made significant progress with 5G expansion, with improved 5G availability in more cities. CEO Hans Vestberg mentioned in an interview that 2022 was the peak year for investments. He added that with the majority of the CAPEX completed, the company is well-positioned to reap the rewards in 2023.
VZ provided FY 2022 guidance of 8.5-9.5% wireless service revenue growth and EPS between $5.1-5.25. This puts its dividend at an attractive 50% payout ratio. Management reiterated their commitment to dividend growth and indicated that bringing debt down to pre-5G levels is a priority. VZ already maintains a healthy A- rated balance sheet with unsecured debt to adjusted EBITDA of 2.7x.
With intense CAPEX in the rearview mirror, VZ is ready to reap the rewards of its 5G and fiber investments. Its low dividend payout ratio is a notable advantage and value proposition. The company can support dividend raises despite economic challenges.
The stock currently trades at an 8.3x forward P/E, making it a bargain at current price levels. Use this market fear to buy 6.4% yields from America's most reliable 5G network.