VZ: Verizon Some thoughts

I view Verizon as a Telcom utility, where you expect steady cash dividend and some stock price growth. The stock price is a big disappointment for the last few years. It is my failure to understand that VZ is a free cash flow story and a big 5G investment cycle, and coming out of very low interest rate, etc. or at least I should have sold out when Buffett sold. ( Luckily, it is a 3% position, btw most of my position are around that range at least when I start and rarely I start with higher % or add to it ) . Here is the stock price performance…

Anyways here is some color on the capital expense

5 yr Trend 2018 2019 2020 2021 2022
12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022
Net Income 16,039 19,788 18,348 22,618 21,748
Depreciation/Depletion 17,403 16,682 16,720 16,206 17,099
Total Cash from Operations 34,339 35,746 41,768 39,539 37,141
Purchase of Fixed Assets -16,658 -17,939 -18,192 -20,286 -23,087
Purchase/Acq of Intangibles -1,429 -898 -2,126 -47,596 -3,653
Capital Expenditures -18,087 -18,837 -20,318 -67,882 -26,740

The big number on 2021 is their 5G Spectrum purchase. The rise you are seeing recently is post earnings move-up. So what did we hear from the earnings that is causing the stock to rally…

From 3Q prepared remarks

We now expect 2023 capital spending to be at the higher end of the previously guided range of $18.25 billion to $19.25 billion.

From call transcripts

Obviously, we’re not going to guide on 2024 at this time, but I can share some qualitative aspects as we look ahead to free cash flow for 2024. On the plus side, we continue to focus the team on an improving EBITDA profile, and that’s the focus of the team. With respect to CapEx, we said a couple of times here in the past that we expect to run at $17 billion to $17.5 billion for 2024, which is back to a business as usual level of spend
that you’ve seen from us

So the cap-ex is reverting to 2018-2019 range, will the company use excess cash to retire debt vs use it to buyback needs to be seen.

EPS - $4.97
PE - 7.25
dividend yield 7.4% ($2.66 per year; and 60% of FCF); expect dividend to go up by 0.05


Today VZ announced results and the stock moved up 6.7%. From Oct’23 low $30 has moved up 40%. Impressive for a telecom utility. Still sporting 6.3% dividend yield. For 2023 FCF is $18.7 B.

Full-year 2023 capital expenditures were $18.8 billion, down from $23.1 billion in 2022 and capex for 2024 is expected to be around ($17-$17.5). VZ expects $1 ~$1.5 B reduction in capex. Expect most of this to go towards retiring debt.

Still a solid dividend and improving fundamentals.