Yielding 5.8%, Is Verizon Stock a Buying Opportunity? | VZ Stock Analysis

SUMMARY

Parkev Tatevosian, CFA, analyzes Verizon's financial performance, highlighting its slow growth, capital allocation concerns, and attractive dividend yield. He concludes that Verizon's undervalued stock and sustainable dividend make it a buying opportunity, reaffirming his positive outlook.

MAIN POINTS

• Verizon reports net new customer additions for two consecutive months, indicating competitive market conditions and slow industry growth. [0:00]
• The company focuses on increasing revenue per user through upselling services and accessories due to difficulties in acquiring new customers. [1:01]
• Verizon's revenue has grown about 10% over a decade, with operating profit margins fluctuating between 19.5% and 24% but lacking steady improvement. [2:01]
• Returns on invested capital have declined from 12% a decade ago to 5.8%, raising concerns about capital allocation in a capital-intensive industry. [3:00]
• Despite operational headwinds, Verizon's stock trades at a low valuation, with a forward P/E of 9 and a discounted cash flow model indicating undervaluation. [4:00]
• Verizon offers a sustainable 5.8% dividend yield and is reaffirmed as a buy, with the analyst expressing increased bullishness as of August 13, 2026. [6:00]

DETAILED ANALYSIS

Verizon has recently achieved net new customer additions for two consecutive months, a notable development in a mature and saturated market where growth typically comes at competitors' expense rather than from industry expansion. The company faces significant challenges in acquiring new customers, as switching carriers is inconvenient for most users, and enticing offers are costly for Verizon. Consequently, the firm's strategy centers on increasing average revenue per user by promoting additional services, accessories, and data packages to its existing customer base.

Over the past decade, Verizon's total revenue has grown modestly from $125 billion in 2017 to $139 billion in the latest trailing twelve months, equating to roughly 1% annual growth. This slow pace underscores the company's status as a stable but unexciting investment from a growth perspective.

Operational efficiency is a key focus, with operating profit margins fluctuating between 19.5% and 24% over the last ten years, reaching 22.7% most recently. However, there has not been a clear trend of improvement, which is concerning given the expectation that mature companies should find ways to lower costs over time. More troubling is the decline in returns on invested capital, which have dropped from approximately 12% a decade ago to just 5.8%.

This is particularly significant in the telecommunications sector, where ongoing infrastructure investments require effective capital allocation to sustain profitability.

Despite these headwinds, Verizon's valuation presents a compelling case for investors. The stock trades at a forward price-to-earnings ratio of just nine, and discounted cash flow analysis suggests the shares are undervalued, with a current price of $48 well below an intrinsic value estimate of $65. The company also offers a robust and sustainable dividend yield of 5.8%, appealing to income-focused investors, especially retirees seeking passive income.

Verizon's ability to maintain this dividend while still generating sufficient cash to reinvest in its network supports the view that the payout is secure. As of August 13, 2026, the analyst reiterates a buy rating on Verizon, citing increased confidence in its value proposition despite ongoing industry challenges.

LINKS

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