Verizon Communications (VZ) is my Top Pick for income-oriented investors in 2023. The firm is struggling with retail cellular subscriber growth because of slower data speeds. Consequently, investors have punished the stock, observes Prakash Kolli, editor of Dividend Power.

The stock price is down nearly 25% in 2022, placing it in a bear market and performing worse than the S&P 500 Index. But the company is working to reverse subscriber trends.

Today, Verizon is one of the three largest American telecommunications companies. Verizon has about 120 million wireless connections, including 91 million postpaid, four million prepaid customers, and around 25 million data devices. In addition, Verizon has about 6.7 million FiOS and other connections.

The company also has approximately 25 million fixed-line telecom connections. The company sold its AOL and Yahoo businesses in 2021. Total revenue was around $133 billion in the fiscal year 2021 and about $135 billion in the last twelve months.

One of the main issues affecting retail cellular subscriber growth is slow data speeds. The company offers 5G, but the speeds are slower than those offered by T-Mobile (TMUS) or AT&T (T). In addition, AT&T has divested its content offering and is more focused on providing services. Additional competition is present from cable companies offering cellular service.

Another risk is that Verizon's balance sheet debt grew because of C-band spectrum purchases. That said, debt is trending down. The credit rating agencies give Verizon a BBB+/Baa1 lower-medium investment grade rating.

Although Verizon has near-term challenges, long-term it is positioned for growth. The company is rolling out its 5G offerings, including the faster mmWave technology called the 5G Ultra Wideband and the C-band. This should speed up data downloads and uploads and expand geographic coverage to better match its two primary competitors, reversing subscriber losses.

In the time being, Verizon sports a 7%+ dividend yield backed by a relatively conservative payout ratio of approximately 47%. In addition, Verizon is a Dividend Contender, having raised the dividend for 18 consecutive years.

Verizon is a deal now. It is valued at a P/E ratio of ~7.2X, compared to a range of about 12X to 15X in the past decade. As a result, investors are getting an undervalued stock, a yield almost at a decade high, and consistent dividend growth.

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