2022 Week 31: Verizon Communications (NYSE: VZ)

Portfolio Update

The FiveTwenty portfolio received no dividends in the past week.

Past Week Dividend$0
Current Quarter Dividend (Q3 2022)$178.18
LifeTime Dividend$4,785.34
Estimated Annual Dividend$5,939.95
Dividend Scorecard

The capital allocation for the week of 07/31/2022 to 08/06/2022 will be used to add to our position in Verizon Communications (NYSE: VZ)

VZ – Position Update

Since our last check-in on VZ in week 43 of 2021, the company reported FY 2021 earnings on 01/25/2022, Q1 2022 earnings on 04/22/2022, and Q2 2022 earnings on 07/22/2022. In addition, the share price decreased 12.7% from $52.93 to $46.19.

TTMPrev. Update10-year median
Dividend Streak15 years15 years
Yield5.54%4.77%4.46%
Payout Ratio47.58%147.5%2
P/E8.5919.992
Entry Criteria Scorecard

1 computed using TTM adjusted EPS of $5.38 as of Q2 2022
2 computed using TTM adjusted EPS of $5.30 as of Q3 2021

Q2 2022 earnings report

Did VZ’s latest earnings report raise any warning flags?

For Q2 2022, VZ reported flat revenue growth and a decrease in net income and adjusted EPS compared to the same period a year ago. The company saw total broadband net additions of 268,000, and postpaid phone net additions of 12,000 during the quarter.

Overall, revenue was flat growing 0.1%, net income decreased 10.7%, and adjusted EPS were 5.8% lower compared to Q2 2022.

Revenue
(in millions)
Net Income
(in millions)
Adj EPS
.
Q2 2021$33,764$5,949$1.39
Q2 2022$33,789$5,315$1.31
% Change0.1%(10.7)%(5.8)%

Additional noteworthy developments during the quarter:

  • VZ’s unsecured debt as of the end of Q2 decreased by $4.8 billion sequentially to $132.5 billion.

Looking ahead, the company adjusted FY 2022 outlooks downward for both wireless service revenue growth as well as adjusted EPS. Wireless service revenue growth for the year is expected to come in at 8.5% to 9.5%, down from a range of 9% to 10%. Adjusted EPS are expected to be in the range of $5.10 to $5.25, down from a previous expected $5.40 to $5.55 range.

Thesis

Why are we adding to our position in VZ?

Following disappointing Q2 2022 results, VZ’s share price has seen a sharp drop. Despite the most recent financial performance, we don’t believe the long term prospects for the company have changed materially.

Furthermore, the current valuation and yield offer a good opportunity to add to our position in the company.

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