Verizon Among Dow Industrials' Most Undervalued Stocks for March

The article discusses the "Dogs of the Dow" investment strategy, which involves buying the 10 lowest-priced stocks in the Dow Jones Industrial Average. The article suggests that one of the lowest-priced stocks, Verizon, is a good candidate for investment. The author notes that while many of the Dow Industrials are too expensive and offer only modest dividends, Verizon is a relatively safe and attractive option.

The "Dogs of the Dow" investment strategy, popularized by Michael O'Higgins, involves buying the 10 lowest-priced stocks in the Dow Jones Industrial Average (DJIA). This strategy aims to capture the dividend yield and the potential for capital appreciation as the prices of these stocks recover. As of the current date, one of the lowest-priced stocks in the DJIA is Verizon Communications (NYSE: VZ). This article explores Verizon as a potential candidate for the "Dogs of the Dow" strategy.

Verizon Communications, a leading telecom company, has seen its stock price drop nearly 30% over the past five years [1]. Despite this decline, Verizon remains a reliable income stock, having raised its dividend for 18 consecutive years. The stock currently trades at $42 a share, offering a forward yield of 6.5% and a forward price-to-earnings ratio of 9 times. This low valuation and high dividend yield make Verizon an attractive candidate for the "Dogs of the Dow" strategy.

Verizon's core postpaid wireless phone business has faced formidable challenges in recent years. The company struggled to gain new wireless subscribers, partly due to intense competition from AT&T and T-Mobile. However, Verizon's consumer business stabilized in 2024, with its total number of wireless retail postpaid subscribers growing 1.4% to 95.12 million. This growth was attributed to localized incentives, marketing campaigns, and the flexibility of its customizable "myPlans" [1].

Verizon's business wireline segment also faced challenges as companies shifted to wireless plans and cloud-based services. However, the company offset this pressure by trimming its workforce and divesting lower-margin businesses. In 2024, Verizon's adjusted earnings per share (EPS) declined 2.5% to $4.59, but it still covered its $2.67 per share in dividends. Its adjusted EBITDA increased 2.1% to $48.79 billion [1].

Despite these challenges, Verizon's low valuation and high dividend yield make it an attractive option for investors seeking income and potential capital appreciation. The "Dogs of the Dow" strategy encourages investors to buy the lowest-priced stocks in the DJIA, which often offer higher dividend yields. Verizon's current valuation and dividend yield position it well within this strategy.

However, investors should be aware of potential risks. Verizon's performance is dependent on the health of its core business, which faces competition from other telecom companies. Additionally, changes in regulation could impact Verizon's operations and profitability.

In conclusion, Verizon Communications is a potential candidate for the "Dogs of the Dow" investment strategy. Its low valuation, high dividend yield, and recent stabilization in subscriber growth make it an attractive option for income-focused investors. However, investors should carefully consider the risks associated with the company's business and the broader market conditions before making an investment decision.

References:
[1] https://finance.yahoo.com/news/verizon-undervalued-dividend-stock-high-081700242.html