If you're looking to invest in Verizon Communication (VZ 1.61%) stock, odds are, you're doing it for the dividend income it can generate for you. That's because, historically, this hasn't been a good stock for growth investors to own. It has typically underperformed the market, and in five years it has declined by 36%.
Is Verizon's stock likely to continue producing lackluster returns for investors in the future, or can this be a good contrarian pick to add to your portfolio today?
NYSE: VZ
Key Data Points
The last time Verizon stock outperformed the S&P 500 was in 2018
It hasn't just been one or two bad years for Verizon; the stock has generally been a poor investment when compared to the S&P 500. Here's a breakdown of how it has performed versus the broad index going back to 2018, which was the last time it was a market-beating stock.
| Year | Verizon Stock | S&P 500 |
|---|---|---|
| 2024 | 6.1% | 23.3% |
| 2023 | -4.3% | 24.2% |
| 2022 | -24.2% | -19.4% |
| 2021 | -11.6% | 26.9% |
| 2020 | -4.3% | 16.3% |
| 2019 | 9.2% | 28.9% |
| 2018 | 6.2% | -6.2% |
Source: yCharts.
During the past seven years, the best return the stock achieved was a 9.2% gain in 2019. And in four of those seven years, it declined in value.
Now, the past doesn't predict the future, but it does offer some insight into how investors have viewed the investment and how the business has performed. In recent years, there has been a lot of volatility in the economy, with rising interest rates and high inflation resulting in less-than-ideal conditions for Verizon. Not only do rising rates make its debt look more worrisome, but higher costs for consumers have also resulted in fewer phone upgrades and general cutbacks on discretionary spending.
Verizon's growth has been virtually nonexistent
Later this month, Verizon will report on its latest earnings numbers, and the results will likely be modest, at best. The telecom company's growth has been flat or declining in recent quarters. There's little reason to expect that will improve in the near future.
VZ Operating Revenue (Quarterly YoY Growth) data by YCharts
The bottom line isn't showing improvement, either. In 2023, the company reported an operating profit of $28.7 billion -- nearly identical to the $28.8 billion operating profit it posted three years earlier in 2020. It was also the second consecutive year that the company's earnings declined.
Can Verizon's stock turn things around in 2025?
There are two scenarios in which I can see Verizon potentially being a good buy this year.
The first is due to stronger economic conditions and consumers upgrading their phones, possibly to new artificial intelligence-powered devices. That can help bolster its growth and improve its top and bottom lines, giving investors a reason to be a bit more bullish on the business. However, it's too early to tell how likely of a scenario this proves to be.
The second is due to a further decline in interest rates. Lower rates could make the stock and its high-yielding dividend a more attractive option for income-seeking investors. However, with economic conditions perhaps not bad enough to warrant several rate cuts this year, this may be an unlikely scenario. Many investors appear to be scaling back their expectations for rate cuts this year, given the strong jobs report released earlier this month.
Overall, I wouldn't expect shares of Verizon to take off this year, simply because there may not be a big catalyst out there for the telecom stock. But if you're looking for a fairly safe, high-yielding dividend, this can still make for a good investment to hang on to.
