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Verizon Communications' Dominance in the U.S. Market Should Continue

August 25, 2014 | About:
prabhat71

prabhat71

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Telecom goliath Verizon Communications' (VZ) results have breathed new life into the stock. After a sketchy start to the year, Verizon has picked up around 7% since releasing results. The organization reported the fifth consecutive quarter of twofold digit operating income and earnings development, determined by its acquisition of the Verizon Wireless share from Vodafone (VOD). Additionally, with the moves that the organization is making, it should have the capacity to sustain its development force despite rivalry from AT&T (T).

How about we examine Verizon's prospects and see why it is a solid long haul purchase.

Solid development

Verizon is seeing robust development in wireless contracts and residential broadband Internet. Eight times out of nine in the pas quarters, the wireless communications company has posted twofold digit development in net income. Since it now has full control of Verizon Wireless in the wake of purchasing the staying 45% stake from Vodafone, it should have the capacity to boost its sales going ahead on reconciliation synergies.

Verizon is making consistent investments in its system and platforms. The telecom goliath is looking to convey high system quality and dependability to offer a rich customer experience.

Investments to drive development

Verizon is bolstering its 4g LTE stage as customers are connecting with the world through cutting edge apps, devices and solutions that run on high velocity networks. Also, Verizon is investing aggressively in its wireline segment as well, and this has helped it enhance its services, applications and solutions in Fios, worldwide IP, security and cloud services. The organization believes that these strategic investments will result in higher productivity and decreased costs. Additionally, Verizon is focusing on enhancing profit and effectiveness by applying incline six sigma principals.

The organization presently has an aggregate of 5.3 million Fios Video subscribers, representing 35% entrance in this segment of the business.

Verizon has also entered into a concurrence with Intel (INTC) to purchase media assets that will help the organization further create its Cloud TV item and services. Verizon will purchase the licensed innovation rights and different assets that Intel has in its cloud stage. This move will help the organization to furnish its customers with feature services coordinated with Verizon's Fios fiber-optic-networks, furthermore with extra over-the-top services. This is surely a decently measured strategic activity that Verizon has adopted. According to the company, this will allow it to enhance its aggressive position in the business sector.

Fundamentals and last words

Verizon has seen strong and robust development in its cash stream. Its operations cash in the past year is $38.8 billion. Free cash stream stands at $21.78 billion. The organization also has an aggregate of $3.54 billion of cash under control. This should permit the organization to invest it in networks in an aggressive manner and purchase spectrum for future development.

Moreover, Verizon has a strong dividend yield of 4.30%, and the payout proportion is very reasonable at 47%. Since Verizon is creating an immense measure of cash stream and is also including a decent number of subscribers for its offerings, which is why it will have the capacity to increase its dividend going ahead.

Verizon presently trades at a trailing P/E of 11, which makes the stock a decent purchase against its companion AT&T. AT&T's earnings are required to develop at a CAGR of 5.6% for the following five years, which is lower than Verizon's normal rate of 6.1%. Hence, it is wise for investors to investing in Verizon as it looks set for long haul development.


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