Telecommunications company Verizon Communications (NYSE: VZ) is the largest wireless carrier in the United States, with over 37% of the market. The company is also an outstanding dividend stock with a 6.2% dividend yield today and an ongoing streak of 18 consecutive annual dividend raises.
So, if you’re looking for passive income to cover your living expenses or to reinvest and supercharge your portfolio’s compounding, Verizon is a great candidate for you right now.
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But what about moving forward? The telecom industry is notoriously competitive among the few companies that dominate the U.S. market, and there’s a constant need to spend to maintain and upgrade the vast infrastructure that makes wireless communications work.
Here is what investors can expect from the stock over the next five years.
Consumers make Verizon’s business go: Consumer wireless and wireline (Fios fiber optic services and landline phone connections) account for about 75% of the company’s total revenue. Subscriber growth is critical because the industry is ruthlessly price competitive; acquiring customers is the best route to growth.
Verizon’s subscriber activity is lumpy. For example, Q4 is generally a big quarter due to the purchases consumers tend to make during the holidays (and the new iPhone usually launches in the fall). As you can see, subscriber losses have trended lower since Q1, turning positive this past quarter:
Verizon acquired TracFone, a leading prepaid phone carrier with 20 million users at the time, in late 2021. However, Verizon has bled prepaid customers since closing the acquisition. It’s encouraging to see Verizon slowly stem those losses and return to prepaid customer growth in Q3.
Verizon has growth opportunities in fiber optics (Fios) and edge computing. As more devices connect to networks, they must transmit more data faster. This spans across the economy, from factory equipment to autonomous vehicles. Verizon is gradually expanding its Fios services, including fiber optic internet, allowing far higher bandwidth.
The company has agreed to acquire Frontier Communications, the country’s largest pure-play fiber provider, for $20 billion to expand its fiber optics footprint. Post-acquisition close, Verizon will have approximately 25 million fiber customers, with a 2028 goal of 30 million and a long-term goal of between 35 million and 40 million.
