Verizon Communications (VZ 0.83%) stock trades down roughly 16% from its 52-week high and about 35% from highs reached back in 2020. As a result, the stock now carries a robust 6.9% forward dividend yield. The stock's underwhelming performance has led to some investors calling for changes in the company. On its third-quarter earnings conference call last week, new CEO Daniel Schulman said that the company will undergo a significant strategic shift.
Let's take a closer look at the wireless carrier's most recent results, and why I think now is the time to buy the stock.
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A new direction for Verizon
With Verizon continuing to lose customers, Schulman said that the company will fundamentally change its strategy, shifting from a technology-centric approach to one centered on its customers. Going forward, it will look to win by offering the best overall customer experience and value proposition. At the same time, it will increase its investment in fiber and bundling (convergence).
Its pending acquisition of Frontier Communications, meanwhile, will significantly increase its fiber network and give it a huge opportunity to bundle services. It noted that its wireless share is under-indexed in areas served by Frontier, so there will be a lot of opportunity to cross-sell its wireless services once the deal closes. Meanwhile, Schulman wants to lower Verizon's expenses, and it will conduct a full review of capital expenditures and capital allocation.
However, the new CEO was quick to say that the company's dividend is not in question, calling it "sacrosanct." Despite the stock's struggles, Verizon's dividend remains well covered. Through the first nine months of this year, it's paid out nearly $8.6 billion in dividends. At the same time, it's produced $28 billion in operating cash flow and $15.7 billion in free cash flow. That's an over 1.8x coverage ratio, meaning it has plenty of room to grow its distribution in the future.
At the same time, the leverage of its unsecured (net unsecured net/adjusted EBITDA) is 2.2 times, showing that its balance sheet is in solid shape. However, it will look to continue to pay down debt, especially as it takes on more when the Frontier deal is completed.
Verizon's revenue grew 1.5% year over year to $33.8 billion, with service revenue edging up 0.8% to $28.2 billion and wireless equipment revenue climbing 5.2% to $5.6 billion.
NYSE: VZ
Key Data Points
Consumer revenue increased by 2.9% year over year to $26.1 billion, with wireless revenue up 2.4%. However, it lost 7,000 wireless retail postpaid phone subscribers in the quarter. Meanwhile, it's added 306,000 broadband net additions, including 261,000 fixed wireless subs and 61,000 Fios internet users. It also added 47,000 wireless retail prepaid net subscribers.
Its business unit continues to be a weak spot, with revenue declining by 2.8% year over year to $7.1 billion, as wireline customers continue to churn off. Business wireless revenue edged up 0.7%, while it added 110,000 new business postpaid subscribers.
Overall adjusted EPS rose by 1.7% to $1.21, while EBITDA rose 2.4% to $12.8 billion.
Verizon kept its full-year 2025 guidance. It continues to project wireless revenue growth of between 2% and 2.8% and for adjusted EPS to rise by 1% to 3%. The company sees operating cash flow to be between $37 billion and $39 billion, after spending about half of that on capital expenditures (capex) to result in free cash flow between $19.5 billion and $20.5 billion.
Why it's time to buy the stock
Verizon's results were a mixed bag, with continued strong cash flow and moderate revenue and earnings growth, but another quarter of churn in its important postpaid retail wireless business. While it's been adding broadband subs, the loss in wireless customers after a price hike has disappointed investors.
However, Schulman is shifting strategies at the right time, just ahead of the close of its Frontier acquisition. The company will have a huge opportunity to cross-sell and can be more aggressive with price through bundling. It's not a new innovative strategy, but one that has served the industry well for a long time.
At the same time, the stock is cheap. Verizon trades at a forward price-to-earnings (P/E) ratio of 8.3 based on 2026 earnings estimates, compared to an 11.2 times multiple for AT&T.
With a big cross-selling opportunity in front of it, a cheap valuation, and a well-covered dividend with a nearly 7% yield, now looks like a great time to pick up some shares of this dividend darling.
