Verizon was a standout performer in the telecommunications market a decade ago. However, the subsequent ten years have painted a different picture for this once-thriving giant.
Let’s take a moment to delve into the past to better understand the present situation.
Verizon Communications (VZ +1.00%) was a powerhouse back in 2015. During the early days of the smartphone revolution, this telecom leader was riding a wave of success. If you had invested $10,000 in Verizon stock towards the end of 2005, participated in the dividend reinvestment program (DRIP), and simply let it grow for a decade, your investment would have flourished, yielding a remarkable $27,400 in total returns.
Today’s Change
(1.00%) $0.40
Current Price
$40.32
Essential Financial Metrics for Investors
Market Cap
$168B
Day’s Range
$39.89 – $40.34
52wk Range
$37.59 – $47.35
Volume
7.9M
Avg Vol
28M
Gross Margin
46.08%
Dividend Yield
6.82%
Reflecting on Verizon’s Decline in Market Performance
As time passed, the initial excitement surrounding the smartphone boom began to wane, although Apple (AAPL +0.53%) successfully established a substantial market capitalization primarily fueled by the success of the iPhone.
Consequently, Verizon’s impressive sales trajectory experienced a significant slowdown. Notably, its smaller competitor, T-Mobile US (TMUS +0.68%), managed to capture millions of Verizon’s mobile subscribers, further complicating the situation for the telecommunications giant. Despite numerous costly upgrades to its network infrastructure, Verizon continued to generate robust cash flows, yet the enchantment of its past growth seemed to fade.
If you had initiated a new investment of $10,000 in Verizon stock on December 22, 2015, your total returns would stand at approximately $4,650 today, bringing your investment’s total value to about $14,650. While this return is certainly better than simply stashing your cash away, it pales in comparison to the performance of the S&P 500 (^GSPC +0.32%), which achieved a staggering total return of $40,220 over the same period.
Image source: Verizon Communications.
Is Investing in Verizon Stock a Smart Move Today?
Verizon continues to hold its ground as a reliable dividend stock, primarily supported by its robust cash flows. Currently, the dividend yield is approximately 6.9%, placing it among the top ten highest yields in the S&P 500.
As a result, this stock may appeal to income investors who prioritize dividends, but its inability to sustain long-term value raises concerns. While my perspective may evolve in the future as I approach retirement, I am not inclined to invest in Verizon stock at this moment. Given the current trajectory, I question whether Verizon will remain a dominant player in the telecommunications sector in the next two decades or even the next ten years.
Anders Bylund has positions in T-Mobile US. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.
