{"id":35342,"date":"2023-07-13T19:46:06","date_gmt":"2023-07-13T23:46:06","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/verizon-best-in-class-7-5-yield-nysevz\/"},"modified":"2023-07-13T19:46:09","modified_gmt":"2023-07-13T23:46:09","slug":"verizon-best-in-class-7-5-yield-nysevz","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=35342","title":{"rendered":"Verizon: Best-In-Class 7.5% Yield (NYSE:VZ)"},"content":{"rendered":"
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Verizon: Best-In-Class<\/h2>\n

In my last article on Verizon (NYSE:VZ<\/span>), “Verizon: Blazing-Fast 5G Is A Buy Signal,” I explained why Verizon’s network is in a position of competitive strength. Verizon’s the leader in 5G home internet and has also blanketed major cities with <\/span>award-winning mmWave (Dark red) and C-Band 5G (Red):<\/span><\/p>\n

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Sample Of Verizon’s mmWave (Verizon)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Now, I will discuss Verizon’s value spread, position vs. MVNOs, inelastic products, and Metaverse tailwinds. Also on the menu: Why I think Verizon will outperform mega-cap tech in a recession, and why Verizon is in a better financial position than T-Mobile (TMUS) and AT&T (T). Let’s begin.<\/p>\n

The Value Spread Is Huge<\/h2>\n

Value stocks have been beaten dow over the past five years. The spread between growth and value is now as wide as it was during the dot-com bubble of 2000:<\/p>\n

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\"S&P<\/span>
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S&P 500 Value Dispersion (J.P. Morgan Asset Management )<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Note: The above graph shows the “dispersion of P\/E ratios in the S&P 500 index.”<\/em><\/p>\n

In fact, the only time the value spread was wider was in 2021 when tech stocks with zero earnings were soaring and digital pictures of monkeys A.K.A. NFT’s were selling for millions of dollars.<\/p>\n

So what does this mean? It means now is not the time to own expensive growth stocks, now is the time to own cheap value stocks (In my opinion). Enter Verizon Communications (VZ), which has a PE ratio of 6.8x, compared to the SPDR S&P 500 ETF Trust (SPY)’s PE ratio of 26x. That’s the kind of value spread I can bet against.<\/p>\n

Potential For Recession Outperformance<\/h2>\n

Telecom cash flows have historically held up extremely well in recessions. Through the horrendous recession of 2008\/09, Verizon’s cash flows actually grew:<\/p>\n

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\"Chart\"
Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

AT&T (T) did alright as well. You see, phone plans and home internet plans enjoy what is called “inelastic demand.” This is because they are essential services. That is, they’re typically the last thing businesses and consumers cut spending on during a recession. And, if the likes of Verizon, AT&T, and T-Mobile (TMUS) should choose to raise prices in unison, consumers will have no choice but to pay up.<\/p>\n

Verizon Vs. MVNOs<\/h2>\n

Even the third party MVNOs like Mint Mobile, Consumer Cellular, and Google Fi are at the whims of the big telecom players because these MVNOs don’t own any infrastructure. Instead, they lease the network capacity from the likes of Verizon, AT&T, and T-Mobile (The companies who actually own the network). In other words, the big telecom players like Verizon have all the pricing power and the little MVNOs have none. Also, Verizon and others tend to give their own subscribers priority over MVNO subscribers ~ this is especially true in congested areas and cities, where Verizon’s subscribers typically get the priority in terms of data speeds.<\/p>\n

The Metaverse Opportunity<\/h2>\n

Verizon claims to be well-positioned to capitalize on the Metaverse:<\/p>\n

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\"Verizon<\/span>
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Verizon And Meta Partnership (Verizon)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Fortune Business Insights has the Metaverse growing at a CAGR of 48% per annum through to 2029, and Verizon could capitalize on this with its leading position in 5G home internet:<\/p>\n

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\"Home<\/span>
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Home Internet Speeds And Prices (CNET)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Industry-Leading Financial Fortitude<\/h2>\n

Among its peers, Verizon has the best interest coverage (By far) and the best credit rating. This is part of why I prefer Verizon over a company like T-Mobile:<\/p>\n

<\/span><\/p>\n\n\n\n\n\n
_____________________<\/td>\nVerizon<\/strong><\/td>\nAT&T<\/strong><\/td>\nT-Mobile<\/strong><\/td>\n<\/tr>\n
Interest Coverage<\/td>\n7.9x<\/td>\n3.8x<\/td>\n2.9x<\/td>\n<\/tr>\n
Credit Rating (Fitch)<\/td>\nA-<\/td>\nBBB+<\/td>\nBBB+<\/td>\n<\/tr>\n
Credit Rating (S&P Global)<\/td>\nBBB+<\/td>\nBBB<\/td>\nBBB-<\/td>\n<\/tr>\n<\/table>\n

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