Stock of the Week
Verizon
Verizon
NYSE Symbol: VZ
Industry: Telecom
Price as of 1/11: $57.46
The major averages wrapped up a volatile and unprecedented year in positive territory with most of the major averages at or near all-time highs. The tech-heavy Nasdaq Composite lead the rally in 2020 with a gain of 43.6%, posting its best one-year performance since 2009. The S&P 500 closed 2020 with a 16.3% gain. The Dow rose 7.3%. As great as tech stocks performed in 2020, the last two months have seen rotation into small and mid-cap stocks along with sectors that have lagged behind. Stocks and sectors that will benefit from the reopening of the economy should outperform in the coming years. Another investment strategy that has a good track record is investing in the Dogs of the Dow with high dividend yields. This week we will highlight another Dow component, Verizon. Verizon is more of an income stock with a 4% dividend yield, but with the rollout of 5G, Verizon is well positioned to outperform in the coming years.
Verizon is the nation's leading wireless phone service provider, boasting a total of more than 94 million wireless customer connections. Like most of us, 2020 will be a year for Verizon to forget as the stock declined 4%, But Verizon spent a lot of money last year with their 5G network connectivity rollout, now in 60 cities. Not counting its ultra-wideband offers, Verizon's 5G service is now available to more than 200 million Americans in 1,800 U.S. cities. Depending on who you ask, that makes Verizon the current 5G leader, and it's poised to hold that lead thanks to huge investments in its fiber-optic network to the sum of over $14 billion in capital expenditures.
Verizon can afford such investments thanks to their strong cash flow of over $18 billion in free cash through the first nine months of 2020. This does not include the money spent on capital expenditures.The strong free cash flow allowed Verizon to hike their dividend last quarter for the 14th consecutive year, keeping the yield over 4%. The cheap valuation with a PE of 12 coupled with the 5G rollout and an improving global economy, could provide good growth and income for shareholders of Verizon in the coming years.
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