Communications Sector

[gfp927z]

>>> Verizon - >>> 3 Recession-Proof Stocks to Buy Now


These companies will likely prosper in almost any economic environment.


Motley Fool

Will Healy

Jun 7, 2020


https://www.fool.com/investing/2020/06/07/3-recession-proof-stocks-to-buy-now.aspx

Verizon has struggled somewhat recently as declining margins in its wireless business and massive investments in 5G infrastructure weighed on the company. Last year alone, Verizon spent $17.9 billion on capital expenditures. This has contributed to the company's $106.56 billion long-term debt load. It also represents a significant burden for a company worth $61.65 billion after subtracting liabilities from assets.

Still, it does not have the much higher debt load and side business distractions of archrival AT&T (NYSE:T). Moreover, consumers need communication and internet connectivity in good times and bad. Even if the economy continues to struggle, the march to 5G will probably continue and the need for smartphones and internet connectivity will be there.

And Verizon has an investing advantage over its other big rival, T-Mobile (NASDAQ:TMUS), as Verizon's shareholders receive a dividend. Verizon paid out $2.46 per share last year and its payout yields about 4.3%. This payout has risen every year for more than a decade. The dividend claims about 51.7% of company profits, leaving plenty of free cash flow left over for infrastructure spending, debt paydown, dividend increases, and other investments.

This has left Verizon the growth-and-income play of the wireless industry. Verizon has risen by about 121% over the last 10 years. While that does not beat T-Mobile, it comes out well ahead of AT&T, which (with its dividend yield of about 6.6%) is primarily an income play.

In addition to a generous payout, the company sells for just 11.9 times forward earnings. Admittedly, some may sour on Verizon as analysts see profit growth averaging 1.9% per year over the next five years. Still, with 5G adoption expected to grow for years to come, Verizon should keep producing growth and income regardless of the broader economy's performance.

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