Is Verizon (VZ) a Compelling Value Play in 2026? A Deep Dive into DCF and Earnings Mispricing

The question of whether Verizon Communications Inc. (VZ) represents a compelling value play in 2026 hinges on a nuanced interplay of discounted cash flow (DCF) analysis, earnings multiple mispricing, and dividend yield strength. With the stock trading at a significant discount to its projected intrinsic value and offering a robust dividend yield, the case for Verizon as a long-term investment appears increasingly compelling.

DCF Analysis: A Case for Undervaluation

Verizon's DCF valuation reveals a stark disconnect between its current market price and its projected future cash flows. Analysts estimate that the company's free cash flow (FCF) will surge from $17.0 billion in 2024 to $23.4 billion by 2029, with further growth anticipated to $28.1 billion by 2035. Using these projections, DCF models calculate intrinsic values ranging from $52.35 to $99.93 per share, depending on discount rate assumptions. At the current market price of approximately $40.30, Verizon appears undervalued by 23% to 59%, depending on the model.

The discount rate assumptions vary widely, reflecting differing views on risk and growth. A CAPM-derived cost of equity of 7.15%-based on a risk-free rate of 4.18%, a beta of 0.72, and an equity risk premium of 4.12%-supports a mid-range valuation. However, some models use lower WACC estimates (4.64%–6.17%) to justify even higher intrinsic values. These variations underscore the sensitivity of DCF analysis to input assumptions but collectively reinforce the notion that the market is underappreciating Verizon's long-term cash flow potential.

Earnings Multiples: A Historical Discount

Verizon's earnings multiple further highlights its mispricing. As of 2025, the company's price-to-earnings ratio stood at 8.65, well below its 10-year average of 12X earnings. Analysts project earnings per share (EPS) to grow from $4.69 in 2025 to $4.86 in 2026, a modest 3.62% increase. Even with this conservative growth rate, the stock's low P/E suggests it is priced for stagnation rather than the robust cash flow expansion outlined in DCF models. This disconnect between earnings growth expectations and valuation metrics points to a potential market oversight.

Dividend Yield: A Magnet for Income Investors

Verizon's dividend yield, currently around 6.7–6.8%, positions it as a top-tier income stock. This yield exceeds its long-term average and places it among the 2025 Dogs of the Dow, with analysts forecasting double-digit total returns in 2026. The company's 20-year streak of dividend increases and its $0.69 per share quarterly payout-set to be distributed on February 2, 2026-further solidify its appeal. Coupled with a $100 million share buyback program (2.4% of outstanding shares), Verizon's capital return strategy enhances shareholder value and amplifies the case for its dividend-driven appeal.

Strategic Tailwinds and Risks

Verizon's strategic focus on 5G and IoT expansion, projected to grow at mid-teens compound annual rates, provides a catalyst for future earnings and cash flow growth. However, risks such as regulatory pressures, competitive pricing in wireless markets, and macroeconomic headwinds could temper these projections. Investors must weigh these factors against the company's strong balance sheet and disciplined capital allocation.

Conclusion: A Convincing Value Proposition

Verizon's combination of undervaluation in DCF models, a historically low P/E ratio, and an attractive dividend yield creates a compelling case for its inclusion in a diversified portfolio. While the company's growth trajectory may not rival high-flying tech stocks, its defensive characteristics and income generation make it a standout value play for 2026. For investors seeking a balance of capital preservation and steady returns, Verizon's current pricing appears to offer just that.