Value investing and short discussion on Verizon (VZ)

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Value investing and short discussion on Verizon (VZ)

Published Date: 2018-08-16 | Source: Share Picks USA | Author: Bruce Ingram | Comments

Value investing and short discussion on Verizon (VZ)

When buying shares, I focus mainly on Dividend Growth shares that are currently at Fair Value or better.

There are a number of benefits to Value Investing. Some obvious and some not so obvious.

If a share is undervalued due to negative market sentiment and not due to fundamental reasons then the share price will drift back to its average P/E ratio, or Price/ AFFO (Adjusted Funds From Operations) for REITS and MLP's.

  • Buying a share at below fair value will produce higher than normal gains when this happens. This will happen without the company making any acquisitions or investments in capital projects etc.
  • When the share price drops due to market sentiment its dividend yield will be above its average dividend yield producing higher dividend yield on your investment. This will result in a higher growth going forward due to compounding.
  • Another obvious advantage of buying shares at below fair value is the that your risk is lower than buying shares that are above fair value

A look at Verizon (VZ) the second largest telecoms company in the USA

VZ's network currently covers 98% of the US population. Currently VZ has 116 million customers with smart phones. The price war with other wireless providers has slowed down. Therefore, VZ should be more profitable in the future.

VZ has made significant investment into 5G technology The migration to 5G, which is being rolled out at the end of 2018, will open up further growth opportunities. 5G is up to 20X faster than 4G. 5G will be able to replace wired and fibre connections into the home. It will also improve communication to IOT devices.

Verizon is currently undervalued and trading at a discount of about 20% to its average P/E. The dividend yield is 4.5% which has increased for the last 12 years. The company has a BBB+ credit rating.

Verizon's earnings are forecast to grow at 8.3%. This coupled with the share price returning to its normal P/E and the dividend yield of 4.5% could result in an annualized ROR of 28% by end of 2019 and 18.75 by the end of 2020.


Disclaimer: Please note that I am not a Registered Financial Planner. The articles I write are based on my own personal research and for my own use and is not to be construed as financial planning advice. At all times readers are urged to exercise caution when investing in any financial instruments, to do their own research


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