Welcome to the Stock of the Day.
Can you hear me now? Good. Today, we’re going to take a look at Verizon Communications (VZ), who is known for operating America’s largest and most reliable wireless voice and 3G network.
With the stock going ex-dividend today, is it time to buy?
Company Profile
If you live in the United States, chances are you have heard of the massive rivalry between Verizon and AT&T (T) However, many don’t realize that Verizon started as an AT&T spinoff in 1984. Fast forward almost three decades later, and Verizon has emerged as a global force in the broadband and telecommunications industry.
The company has diversified into a number of telecommunications services, including land line telephone and internet services, as well as one of the most advanced wireless networks on the planet.
Dividend and Earnings Buzz
As I mentioned earlier, VZ goes ex-dividend today. Shareholders of record will receive 53 cents per share on May 1. The stock pays one of the strongest dividends in the industry (with a 4.4% yield), but I still don’t recommend you add it right now.
I’ll cover this in more detail shortly, but institutional buying pressure–a good metric of a stock’s risk-to-return ratio–is very low for VZ shares. And unless Verizon can wow investors with its April 24 first-quarter earnings report, I don’t expect this to change anytime soon.
Speaking of which, the analyst community is calling for earnings of 85 cents per share on $30.67 billion in sales. Compared with the year ago quarter this works out to 4.3% sales growth and 25% earnings growth.
However, given that the company hasn’t posted a blowout earnings surprise for the past several quarters I don’t expect this earnings announcement to be a game-changer for VZ.
Current Ratings
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. For much of the past year, this stock fluctuated between a hold and a sell. The stock does earn As on four of the metrics I graded it on (operating margin growth, cash flow, return on equity and earnings momentum).
But it could work on sales growth, earnings growth and earnings surprises, which are all C-rated. So VZ receives a B for its Fundamental Grade. Meanwhile, institutional buying pressure could hardly be lower for VZ shares so the stock receives an F for its Quantitative Grade.
Bottom Line: As of this posting I consider Verizon stock a D-rated Sell.
Would you like to check the fundamentals backing up one of your stocks? For more stock grades, please visit my Portfolio Grader website!
