A Uniquely Positioned Telecom Giant
While a higher dividend yield often suggests an increased risk of future reductions, Verizon is bucking the trend. The company’s financial results from last year, along with its outlook for 2024, showcase a strong and stable performance.
A Free-Cash-Flow Machine
Despite a decline in revenue and earnings, Verizon demonstrated its resilience. Strip away non-cash charges, and the company posted a profit for the period. Furthermore, the company strengthened its cash flow, with cash from operating activities increasing by $400 million in 2023. Verizon’s reduced capital expenses enabled it to generate $18.7 billion of free cash flow, which comfortably covered its $11 billion dividend outlay. Verizon’s robust cash flow and decreasing leverage ratio allowed the company to maintain its solid credit rating (A-/BBB+/Baa1).
Promising Future Ahead in 2024
CEO Hans Vestberg described 2023 as a “year of change” for Verizon, highlighting the company’s continuous improvement. Verizon expects its total wireless service revenue to grow by 2% to 3.5% in 2024, building upon last year’s 3.2% increase. Additionally, adjusted EBITDA is projected to improve by 1% to 3% after a slight decrease in 2023. Verizon anticipates further improvement in metrics such as operating cash flow and free cash flow. A reduction in capital spending, coupled with growing revenue and adjusted EBITDA, will contribute to the company’s strong cash generation. Thus, Verizon will likely have ample free cash flow to strengthen its balance sheet and increase its dividend payout.
An Attractive Option for Investors
As Verizon continues to produce rising free cash flow and strengthen its balance sheet, it presents a lower-risk investment opportunity with a high-yielding dividend. The company’s consistent performance and the expectation of further improvement in 2024 position Verizon as an attractive choice for investors.