U.S. telecom company Verizon (VZ) is a Top Pick for 2022, especially for those seeking income; its mobile network is the largest wireless carrier in the United States, with about 121 million subscribers, explains Prakash Kolli, editor of Dividend Power.

Verizon's cellular network serves over 91 million post-paid, 4 million prepaid, and 25 million data customers. Additionally, the company recently acquired Tracfone, adding another 20 million prepaid customers.

Verizon also owns the FiOS fiber network and has about 25 million fixed-line connections in the Northeast US. Verizon has an online media group from the acquisitions of AOL and Yahoo, which it may sell. Total revenue was $128,292 million in 2020 and $134,238 million in the last 12 months.

The company has performed relatively well during COVID-19 since consumers and businesses still require cellular and broadband services. In addition, demand from the work and play from home trend is still elevated, and more companies are moving to a hybrid work model. This change should keep demand for cellular and broadband services higher.

However, Verizon is one of the companies with a negative return (-7.0%) year-to-date in the Dow 30. The company faces increasing competition from cable companies trying to sell cellular service in limited areas and a refocused AT&T (T).

Notably, cable companies are now bidding at C-band spectrum auctions. Competition is also intense in broadband, where Verizon's FiOS service overlaps with cable companies.

One risk is Verizon's debt position was relatively conservative but is rising due to spectrum purchases. As a result, total debt has increased to ~$179 billion, and net debt is ~$168.8 billion. However, interest coverage is still about 8.9X, and the leverage ratio is 3.0X.

Despite the challenges, Verizon is positioned for growth. The company is rolling out its 5G offerings, including the faster mmWave technology called the 5G Ultra Wideband. Additionally, the company plans to roll out its C-band service after buying spectrum. In addition, Verizon is launching a fixed-wireless service that combines its fiber and latest wireless service.

Verizon’s dividend is secure with a payout ratio of about 48%. The stock is yielding approximately 4.9%, higher than the average in the past 5-years, making it attractive to investors seeking income. Verizon is undervalued, trading at a price-to-earnings ratio of ~9.7X versus an average of about 13X in the past decade. Investors are getting a deal, and I view the stock as a long-term buy.

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