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Friday, 10/24/2003

Can You Hear Me Now? Good!
By Nich Sheldon
VZ - Verizon Wireless

Company Description

Verizon Wireless is the nation's leading provider of wireless communications. The company has the largest nationwide wireless voice and data network and 34.6 million customers. Headquartered in Bedminster, NJ, Verizon Wireless is a joint venture of Verizon Communications (NYSE:VZ - News) and Vodafone (NYSE and LSE: VOD - News News). Find more information on the Web at

[Source: Company Press Release]

Reasons to Invest:

On Wednesday, my wife and I set out to find a Halloween costume in a local mall. On our way out of the mall we passed a little girl who was talking on a cell phone. I was shocked when I heard another phone ring, and watched as her friend reached into her purse for her mobile. I was confused because these girls couldn't have been any older than 12 or 13 years old, and the both of them had their own cell phones. Call me old fashioned, but I remember when kids in high school were considered "drug dealers" just for having pagers.

I suppose society is advancing so fast now that even young teenagers are toting cell phones around. Then I remembered that one of my close personal friends does not even have a house phone. I asked him if he knew of other people who might only use cell phones (instead of house phones) and he said "of course. Why would people pay for a house a phone and a cell phone? Besides, you have an answering machine on your cell phone, you can text message people on your cell phone, and there are even some phones that take pictures and connect with the Internet."

I never thought about it that way I guess. Most people do have cell phones these days so that they can be reached at all times. Heck, even kids are sporting cell phones. How else would all of those booths in the middle of the mall be making money off of new cell phone covers and cases? Furthermore, why would anyone pay for both a house and a cell phone, when a cell phone can perform the same tasks as a house phone, and has built in caller I.D.?

Keeping this in mind, I decided to look into the DJ Us Telecommunication Index (DJUSTL) and found that over the past few weeks the index has been moving sideways. However, the MACD for the index is giving off a bullish signal. The index is tracking along the 200-DMA and if this moving average can hold as support we could see it moving higher over the next few months. Noteworthy, is the fact that most of the major cell phone providers are meeting or beating earnings with the exception of Sprint PCS (NYSE:PCS), which is faltering to price wars from its competitors.

One of those competitors is Verizon Wireless (NYSE:VZ). Verizon is the largest wireless telephone operator. This, coupled with many other factors is why Verizon is this week's Drip of the Week.

Another reason that Verizon looks so attractive to us is because they just won 3G cdmA-List(TM) Awards. These awards were given to VZ at the innagural 3G cdmA-List Awards (TM) Program, which was hosted by Qualcomm. This program recognizes leading companies, public agencies and non-profit organizations for their innovations and impacts on wireless data solutions. Out of 120 nominations, the judges recognized 11 A'List Winners. Of those eleven awards given out, five of them were given out to Verizon customers.

Verizon is set to announce earning of $0.62 next Tuesday, October 28th, 2003. 35 analysts are covering VZ's earnings, and the low estimate is $0.58, while the high estimate is $0.67. If VZ meets or beats its estimates, we could see the telecom index moving higher next week.

In regards to dividends, Verizon yields a hefty dividend of 4.63%, or $1.54 per share per year.

My portfolio doesn't have any telecom DRIP's and at its current level, I can really see VZ being a good candidate. A quick look at Verizon's chart and one can see that VZ has been on a bullish rebound since October 14th. For the past couple days, Verizon has been closing over its 200-DMA and if they manage to beat earnings, the stock could break through the 34 level, which has been short-term support for the stock since mid September. I suspect that the stock could start using this level as psychological support, especially since the 50-DMA is currently resting there as well.

Don't get me wrong, I know that these predictions are shorter-term, but I have not lost sight of the long-term outlook for this stock. As I have stated in previous Drip of the Week articles, some of my loyal readers have asked that I tell them where I think the stock is headed in respects with both the shorter-term and the longer-term.

Verizon is predicting that their dividend percentage growth rate over the next five years will increase by 0.39 percent. While this percentage increase is minimal at best (in comparison with most of the Drip of the Week's we have spotlighted), keep in mind that VZ's dividend yield is already a whopping 4.63%, and this increase would put their dividend over 5%.

Also worth mentioning is the fact that over the course of the past three years, Verizon's revenue's have increased every year. Just over this past quarter, which ended on June 30th, 2003, VZ's revenues rose 1 percent to $33.32 billion. Their net income from continuing operations and before an account change totaled $3.18 billion. In an industry of price wars among several other cellular providers, this fractional revenue growth is impressive. I mean it must be hard to continue hammering out gains in an industry that has so many aggressive competitors.

I suspect that over the next twelve to sixteen months that we could see Verizon back up to the June highs around 40 and change. If VZ's revenues continue to increase and customers continue to be more than satisfied with their cellular plans, then I can see VZ back up to the 50 range over the next three to four years. Remember, this is my personal opinion based upon my experience and research as a Drip Investor.

This ends another exciting episode of the Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the limelight.

Until Next Week,
Nich Sheldon

Broker Recommendations

Strong Buy         3
Buy                9
Hold              22
Sell               1
Strong Sell        0

Brokers Covering  35

DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment:  Yes

Min/Max Investment = $50-$200,000/Year

Reinvestment Fees - 
Dividend investment fees: $1.00 to $2.00 + $0.03/share
Cash investment fees: $2.50 + $0.03/share
Auto reinvestment fees: $1.00 + $0.03/share

Transfer Agent:

Corporate Headquarters:
1095 Avenue of the Americas, 36th Floor
New York, NY 10036
Phone: (212) 395-2121
Fax: (212) 921-2971


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