Cybersecurity firm VeriSign (NASDAQ:VRSN | VRSN Price Prediction) helps keep the internet safe. Despite acting as a background player on the internet, the stock has been thrust into the spotlight. It’s outperformed the S&P 500 and Nasdaq Composite year-to-date and over the past year.
The company’s recent dividend announcement has made it even more appealing, as it now generates cash flow. Furthermore, a $0.77 dividend and an EPS of $2.10 reveal a 36.7% dividend payout ratio. That’s low enough to support meaningful long-term dividend growth.
Even though shares are up by more than 65% over the past year, you may have not missed the boat. These are some of the reasons why VeriSign still looks attractive.
The Internet Is Growing
As the internet grows, there will be more websites and data to protect. That bodes well for VeriSign, as it means more customers. VeriSign may also have the flexibility to raise prices in the future as more companies seek its services.
Furthermore, VeriSign’s revenue and profits continue to grow as more people start online businesses. The company sells website domains to registrars that act as the middlemen, like GoDaddy (NYSE:GDDY), for business owners.
VeriSign enjoys stable recurring revenue and steadily adds more customers. Plus, since the internet doesn’t require as much infrastructure as other industries, profit margins are much higher. This setup has helped the company boast net profit margins close to 50% each quarter while growing its top line.
Cybersecurity Has Become Essential
Cybersecurity’s meteoric rise is another reason to keep an eye on VeriSign. Any website is vulnerable to hackers and needs good security tools and protocols. VeriSign is one of the companies that keep websites safe, and businesses won’t be shifting away from cybersecurity anytime soon.
The cost of getting hit with a cyberattack is often more expensive than what companies pay for cybersecurity tools. This fact becomes more apparent as companies grow. For instance, cyberattacks can take down websites. When a website is down for any amount of time, it represents lost revenue for the business.
Cyberattacks can also result in valuable information and sensitive details being stolen and leaked. This outcome can hurt a company’s reputation and cause potential customers to do business with competitors instead. You might also lose some of your existing customers if your company gets hit with a cyberattack.
Insulation From Economic Uncertainty
VeriSign’s business model is largely protected from tariffs and other economic uncertainties. That makes the stock more attractive for people who still want to beat the stock market amid volatility and fear.
When businesses face tariffs and other uncertainties, it’s natural for them to cut costs. However, they aren’t going to give up their domain names. That only happens when a company has already gone out of business. It’s one of the last expenses companies will ever cut.
VeriSign also enjoys recurring revenue, so it’s less susceptible to sharp drops in revenue and net income. This durability also comes with a recently instated quarterly dividend. VeriSign has the components of a mature blue-chip dividend stock, but it’s still able to maintain respectable mid-single-digit revenue and net income growth rates.
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