Consolidation is rapidly occurring within the cable TV industry and there are plenty of ways to profit from it, as I wrote in a recent article. Here I’m focusing

on just one related investing idea: Verizon (VZ) stock.

The U.S. cable TV industry is intricately tied to the telecommunications industry, as was recently demonstrated when AT&T (T) announced it is buying Direct TV (DTV), subject to regulatory approval. Verizon is a dominant player that has been absent in the M&A game between cable and telecommunications companies. It has 34% market share of all wireless subscribers in the U.S. Its closest rival in the space is AT&T, which also had 34% market share as of the second quarter of 2014.

Verizon Stock Earnings Trend

For long-term investments, I look for an upward trend in sales and earnings. Let’s take a look at year-over-year results for Verizon for the past four quarters:

• Starting in Q4 2013, Verizon stock posted $1.76 (66 cents adjusted) earnings per share (EPS) — a nice improvement from its Q4 2012 EPS loss of $1.48 (a gain of 38 cents adjusted). On the revenue front, sales were $31.1 billion for the quarter up 3.4% from the same period in 2012, with 84% of revenue being generated from Verizon’s wireless division, FIOS and strategic enterprise services.
• In Q1 2014, Verizon stock posted $1.15 ($0.84 adjusted) EPS, compared to $0.68 (also $0.68 adjusted) EPS in Q1 2013. Revenues for the quarter were $30.8 billion, up 4.8% from the same period the previous year driven by strong sales in wireless and FIOS services.
• Q2 2014 continued the trend with Verizon stock posting $1.01 ($0.91 adjusted) EPS compared to $0.78 EPS ($0.73 adjusted) the same period in the previous year. Revenue was $31.5 billion, up 5.7% from Q2 2013.
• Verizon Stock’s Q3 2014 EPS came in at $0.89, compared to $0.77 ($0.78 adjusted) in Q3 2013. Revenues for Q3 2014 were $31.6 billion an increase of 4.3% compared to the same period last year.

In total, Verizon stock has posted four continuous quarters of year-over-year earnings and revenue growth. That is a positive trend!

Verizon Stock Fundamental Analysis

Verizon stock’s consensus price target is $55, about $5 short of the current trading range. Verizon has a 1.74 price-to-earnings growth (PEG) ratio, making it appear close to fair value. The trailing 12 months (TTM), P/E ratio of 10.95 compared a forward P/E of 13.2 implies contracting earnings.

Verizon stock currently has a return on assets for the past year of 6.73%, which is the highest it has been in years. That has driven Verizon stock’s return on equity on a TTM basis to 65.64% and its return on invested capital to 15.68% — far exceeding anything that the company has been able to produce in the past 10 years.

Furthermore, Verizon Stock offers a nice 4.3% dividend yield, with a 44% payout ratio and a history of increasing its dividend by about 3% annually.

Should You Buy Verizon Stock?

I would put Verizon in the same category as AT&T stock. Verizon has a beta of .03, which means it is not very volatile. Plus, it offers a good dividend yield. It can offset the volatility risk of small and mid-sized equities. If you don’t own AT&T, then Verizon  is a solid buy-and-hold stock for a well-diversified portfolio.

As of this writing, Kenneth Fick did not hold a position in any of the aforementioned securities. Write him at kfick@piercethefog.com or follow him on his blog at www.piercethefog.com.