Verizon’s Dividend Is Nice But Its Debt Keeps Us on the Sidelines

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By Brian Nelson, CFA

On April 22, Verizon (VZ) reported mixed first quarter results that showed revenue and non-GAAP earnings per share exceeding the consensus forecast, but total postpaid phone net losses coming in at 289,000 in the period. Total operating revenue increased 1.5% in the quarter year-over-year, while adjusted earnings per share excluding special items advanced to $1.19 compared to $1.15 in the first quarter of 2024. Cash flow from operations totaled $7.8 billion, up from $7.1 billion in last year’s quarter, while free cash flow came in at $3.6 billion, up from $2.7 billion in the first-quarter 2024.

Management had the following to say about the quarter:

Verizon plays an essential role in our customers’ lives and our differentiated value proposition delivers what customers want and need, on their terms. We continue to drive our multi-year customer-first strategy, launching new programs such as our 3-year price lock and free phone guarantee for consumers and My Biz Plan for small and medium sized businesses. With our high quality customer base, network superiority and position of financial strength, we have the momentum and flexibility to continue innovating to meet customer needs and invest for growth.

Looking to 2025, Verizon expects total wireless service revenue growth between 2-2.8%, while adjusted EBITDA growth is targeted in the range of 2-3.5%, with adjusted earnings per share growth of 0-3%. Cash flow from operations is expected in the range of $35-$37 billion with capital spending expected in the range of $17.5-$18.5 billion, resulting in free cash flow of $17.5-$18.5 billion. Verizon ended the first quarter with total unsecured debt of $117.3 billion, compared to $117.9 billion on a sequential basis. Though Verizon has an attractive dividend yield of 6.3%, we continue to remain on the sidelines due to its enormous debt load.

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