Telecom & Wireless

Verizon Leads Dow Winners, Up 10%

Douglas A. McIntyre

Published: February 20, 2016 9:05 am

Last Updated: January 13, 2020 12:57 pm

Despite an attempt at a rally, the Dow Jones Industrial Average is still down 5.93% for the year at 16,391.99. Very few stocks are in positive territory, but among those that are, Verizon Communications Inc. (NYSE: VZ) is up 10%.

The increase is not new to 2016. At $50.86, Verizon shares trade very near a 52-week high of $51.20, against at 52-week low of $38.06. Its primary rival, AT&T Inc. (NYSE: T), trades near the top of its range as well.

Among the reasons for Verizon’s performance is its 4.50% yield. It has a rock solid balance sheet and is in businesses that have wide moats. Some of the other largest dividend stocks are energy giants, and low oil prices threaten their ability to pay out consistently.

Verizon has three primary businesses. One is its ancient landline business, which cellular phones and broadband-based phones have deeply injured. However, Verizon has kept the sector profitable, despite the shrinkage.

Verizon has the largest cellular subscriber base in the United States. AT&T can challenge the count, but the two other participants in the business, T-Mobile US Inc. (NASDAQ: TMUS) and Sprint Corp. (NYSE: S), cannot come even close, despite T-Mobile’s recent strong quarter. Sprint in particular seems to be in a death spiral.

And Verizon has laid siege to the cable and satellite TV businesses with its fiber to the home operations, called FiOS. It has the capacity to bundle the service with cellular and television, which puts it in an enviable position.

Verizon is the top performer in the Dow this year. Given the general business environment and the state of other Dow components, it could keep that lead all year long.