How you think about Verizon Communications (VZ 1.17%) could depend on whether you see the proverbial glass of water as half-empty or half-full. For example, some will note that the telecom stock has lagged well behind the S&P 500 over the last 12 months. Others, however, will rightly point out that Verizon has trounced the market over the previous three- and six-month periods.
The difference in views could also surface with the company's fourth-quarter results, announced on Tuesday. Verizon just delivered plenty of bad news -- but here's why investors didn't care.
Bad news for Verizon in multiple areas
You won't have to look hard to find negatives with Verizon's Q4 results. Starting at the top of the income statement, the telecom giant's operating revenue slipped 0.3% lower year over year to $35.1 billion.
The main culprit for Verizon's top line was a decline in wireless equipment revenue. This resulted from postpaid upgrades falling by 17.9% from the prior-year period.
The issues for Verizon trickled down to its bottom line as well. The company posted a net loss in Q4 of $2.6 billion, or $0.64 per share, based on generally accepted accounting principles (GAAP). In the same quarter of 2022, Verizon delivered positive earnings of $6.7 billion, or $1.56 per share.
A pretax loss from special items of around $7.8 billion weighed heavily on Verizon's Q4 results. This loss included a $5.8 billion goodwill impairment and a $992 million mark-to-market adjustment for the company's pension and other post-employment benefits liabilities.
Even on an adjusted basis, though, Verizon's earnings still declined year over year. The company reported adjusted earnings per share of $1.08 in Q4, down from $1.19 in the prior year period.
The silver linings that investors applauded
Despite all of this bad news, Verizon's share price jumped close to 6% on Tuesday following the Q4 update. Why? Investors applauded several silver linings in the company's generally gloomy earnings results.
The big story was that Verizon's wireless business delivered impressive growth. Total wireless postpaid phone net additions more than doubled year over year to 449,000. Consumer postpaid phone gross additions jumped 17% year over year, the company's best quarterly performance since 2020.
Verizon's broadband business continued to pick up momentum as well. Total broadband net additions in Q4 came in at 413,000. This marked the fifth consecutive quarter Verizon has reported more than 400,000 broadband net additions.
For full-year 2023, Verizon generated free cash flow of $18.7 billion. This total is up from $14.1 billion in 2022.
Investors also found something to like in Verizon's guidance for 2024. The company projects total wireless service revenue will grow between 2% and 3.5%, reversing last year's decline.
Is Verizon stock a smart pick to buy now?
Investors seeking strong growth probably aren't going to view Verizon as an attractive stock to buy. That's nothing new. However, I think that there's a much different story for income investors.
Verizon's dividend yield currently stands at nearly 6.4%. The company has increased its dividend for 17 consecutive years. I expect that shareholder-friendly streak to continue.
Verizon's dividend payout ratio is a healthy 52.8%. Rising free cash flow puts the telecom leader in an even stronger position to boost its dividend in the future.
Income investors should see Verizon as a glass of water that's more than half-full, in my opinion. If they have some cash to put to work, they might want to take a sip of this solid dividend stock.
