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?
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.
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!