The market has taken a pounding for days, almost exclusively because of the global spread of the coronavirus. The number of cases in the United States is surging, and the Centers for Disease Control and Prevention (CDC) says there will be more. Add the plunge in oil prices to that. Investors are scrambling for safe-haven stocks. They need to be, among other things, companies that do business almost exclusively in the United States, where the spread is still fairly modest. They need to be companies not tethered to revenue that might drop if the virus spreads further, and companies with rock-solid balance sheets and bondlike yields.
The publicly traded corporation at the top of this list is Verizon Communications Inc. (NYSE: VZ). Almost all its telecom business is based in America. It is the largest wireless operator in the United States, with 155 million customers. It also has a huge landline business. Its earnings are not threatened by media holdings, as rival AT&T Inc.’s (NYSE: T) are. AT&T owns the Warner assets, which came with its buyout of Time Warner. That gives it some exposure. Verizon does not have similar exposure.
Verizon’s common stock yields 4.3%. That Verizon has paid a dividend every year since it was formed in 2000 demonstrates its balance sheet strength.
Verizon has underperformed the Dow Jones industrials for most of the past year. That has changed in the past five days. Verizon is flat, while the Dow is off 3.4%. That Dow figure is about to get much worse
Verizon’s strength, compared to most other mega-cap stocks, could improve if COVID-19 spreads in the United States. People may become isolated from one another if locations like schools or stores are closed. This becomes an even larger issue if some Americans are forced to stay at home.
Verizon also has a strong near-term future advantage. The rollout of ultrafast 5G will mean many subscribers will upgrade to the service, which will allow Verizon to raise prices.
As the grip of the illness spreads, Verizon’s business is in as safe a position as any mega-cap stock.
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