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 www.verizonwireless.com.
[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
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
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 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 DripAdvisor.com Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the DripAdvisor.com limelight.
Until Next Week,
Strong Buy 3
Strong Sell 0
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