Why I Just Bought More of This Ultrahigh-Yield Dividend Stock
Verizon's valuation is attractive in a market that's priced for perfection.
The telecom giant shouldn't be affected much by tariffs.
Its dividend gives Verizon a great head start toward providing double-digit total returns.
10 stocks we like better than Verizon Communications ›
Verizon Communications (NYSE: VZ) is on a roll. The telecommunications giant recently reported better-than-expected second-quarter results. Verizon raised its full-year guidance. For the 35th year in a row, J.D. Power recognized as having the best wireless network quality.
I recently bought more shares of Verizon. However, my decision to add to my position had nothing to do with any of the aforementioned positives for the company. I completed my purchase before Verizon's Q2 update. Why did I just buy more of this ultrahigh-yield dividend stock?
I've got a feeling
As The Beatles sang on the rooftop of a London building in 1969, I've got a feeling. My feeling, though, isn't a warm and fuzzy one. I suspect another stock market selloff is on the way. Three underlying reasons form the basis of this hunch.
First, the Buffett indicator is at an all-time high of 209%. This indicator reflects the total market capitalization of U.S. stocks as a percentage of U.S. GDP. Warren Buffett stated in a 2001 Fortune article that if this metric approaches 200%, "you are playing with fire." I don't find it surprising whatsoever that Buffett isn't buying many stocks these days.
The second reason for my concern also relates to stock market valuation. The S&P 500 (SNPINDEX: ^GSPC) Shiller CAPE ratio is close to its second-highest level ever. Soon after the ratio peaked in early 2000, the stock market plunged as the dot-com bubble burst. After hitting its second-highest level in late 2021, the S&P 500 slid into a bear market.
Third, I think the full economic impact of the tariffs implemented by the Trump administration has yet to be felt. Trade deals may reduce this impact somewhat, but the bottom line is that Americans will probably pay higher prices on many products. Even if some U.S. companies absorb the higher costs, that will translate to lower earnings. Either scenario could eventually affect the stock market.
Verizon checks off the boxes
Where does Verizon fit into all of this? The company and its stock check off the boxes for what I'm looking for in a time of uncertainty.
Importantly, Verizon's shares aren't priced for perfection in a market that arguably is. The telecom stock's forward price-to-earnings ratio is below 9.2. That's a far cry from the S&P 500's forward earnings multiple of 22.7. It's also lower than the valuations of Verizon's largest peers, AT&T (NYSE: T) and T-Mobile US (NASDAQ: TMUS).
The executives of many public companies have spoken extensively about tariffs in their quarterly updates. That's because concerns have mounted about how businesses will be affected by trade policies. Guess how many times tariffs were mentioned in Verizon's Q2 earnings call by either management or analysts? Zero.
There's a simple reason tariffs haven't been a hot topic for Verizon: The company is largely resistant to the impact of tariffs. Furthermore, Verizon's business is somewhat resistant to overall economic downturns. Wireless services have become a must-have that consumers won't do without, even if they have to pinch pennies in other ways.
What if the stock market and economy roar?
My suspicion that the stock market could sink in the not-too-distant future could be totally off-base. The good news is that even if the stock market and economy roar, Verizon should still perform well. The company's business looks strong. It's on track to close the acquisition of Frontier Communications (NASDAQ: FYBR) in early 2026, which should boost growth.
I can't leave out Verizon's dividend, either. The telecom giant's forward dividend yield of 6.3% gives Verizon a great head start in delivering double-digit percentage total returns. Thanks to a nice increase in free cash flow expected this year, that juicy dividend looks even more secure.
I've got a feeling that Verizon will be a long-term winner regardless of what happens over the near term.
Should you buy stock in Verizon Communications right now?
Before you buy stock in Verizon Communications, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Verizon Communications wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $634,627!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,046,799!*
Now, it's worth noting Stock Advisor's total average return is 1,037% — a market-crushing outperformance compared to 182% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of July 21, 2025
Keith Speights has positions in Verizon Communications. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.
Why I Just Bought More of This Ultrahigh-Yield Dividend Stock was originally published by The Motley Fool
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Insider
a few seconds ago
- Business Insider
Here are the top recession indicators economic forecasters are watching for
Murmurs about a potential recession are rising again after a weak July jobs report, and there are a few signals that forecasters are watching for as early warning signs. The US added just 73,000 jobs for the month, while job gains for May and June were revised downward by a combined 258,000. Besides revisions that took place during the pandemic, that was largest two-month downward revision in about 46 years, according to an analysis from Morgan Stanley. To markets, the message is getting clearer: the US economy is on shakier footing than originally thought — and the odds of a recession might be higher despite most forecasters still calling for a soft landing in 2025. "The economy is on the precipice of recession. That's the clear takeaway from last week's economic data dump," Mark Zandi, the chief economist at Moody's wrote in a post on X over the weekend, pointing to weaker jobs data in a separate post. "There was a definite narrative shift in the economics community on Friday given the severity of the payroll revisions for May and June," Kevin Gordon, a senior investment strategist at Charles Schwab, wrote in a note on Monday. Economists are now focusing on a handful of key indicators in the coming months that could be early warning signs of a recession around the corner. The next jobs reports are key The job market is now in the spotlight. Any additional signs of weakness could send a strong signal that the economy is turning a corner into a recession, Schwab's Gordon said. "As always, no single report should be obsessed over or extrapolated; but if we continue to see a sharp slowdown in job growth and drift higher in the unemployment rate—consistent with the trends from May to July—it would bring forward the possibility that recessionary conditions are forming quickly," he added. Economists will be sifting through one more month of labor market data before the Fed's next policy meeting in September, when the central bank is expected to trim interest rates by 25 basis points. Economists at Goldman Sachs said they believed the US job market was now approaching "stall speed" — a state where the labor market begins to weaken in a "self-reinforcing fashion." The bank added that its estimates of underlying jobs growth had "plummeted" as a result of the downward revisions, which were on par with other two-month payrolls revisions that have been associated with recessions in the past: The magnitude of the latest drop implies a 9 percentage point increase in the risk of a coming recession, Morgan Stanley economists wrote. Consumer spending Wall Street is also on high alert for signs that Americans are reining in their spending. The view that the US economy is on solid footing is starting to look "rather perilous," according to Michael Brown, a senior research strategist at Pepperstone, given that a weaker job market could cut into consumer spending in the coming months. Americans are already beginning to tighten their wallets. Though consumer spending ticked higher overall in June, personal consumption expenditures on durable goods, one measure of how much Americans are spending on items, declined to $2.24 trillion in June, down around $40 billion from its peak in April, according to the Bureau of Economic Analysis. The Institute for Supply Management Services Index also ticked lower to 50.1 from 50.8, in July, a sign Americans are beginning to pull back on services spending as well, according to Oliver Allen, a senior US economist at Pantheon Macroeconomics. "Spending on services has already slowed significantly from its solid pace last year, and the clear deterioration in the labor market and drag on real incomes from tariffs suggest a marked recovery is unlikely," Allen wrote in a note, though added that he believed a "stagnation" was more likely in the coming months than a collapse in spending. "Consumer spending has flatlined, construction and manufacturing are contracting, and employment is set to fall. And with inflation on the rise, it is tough for the Fed to come to the rescue," Moody's Zandi wrote on X.
CNBC
a few seconds ago
- CNBC
Disney earnings are coming Wednesday. Here's what top analysts expect
Walt Disney is on the docket to release fiscal third-quarter results before the stock market's opening bell Wednesday, and most analysts expect the entertainment giant to once again beat Street expectations. An LSEG survey shows analysts, on average, estimate that Disney will earn $1.47 per share on $23.73 billion in revenue. Those results would correspond to earnings growth of 1.5% year over year, as well as a 2.5% rise in revenue when compared to the year-earlier period. The low-single-digit growth comes after Disney's fiscal second-quarter earnings and revenue beat analyst expectations, boosted by better-than-anticipated subscriber growth for the Disney+ streaming platform. In the March quarter, Disney saw revenue growth in all three of its business segments — entertainment, sports and experiences — and selectively raised some of its fiscal 2025 guidance. Since the start of 2025, shares of Disney have gained almost 7%, trailing the S & P 500 by a hair. DIS YTD mountain DIS YTD chart Heading into June quarter earnings, most of Wall Street is bullish on Disney, with some analysts pointing to potential catalysts in Disney's parks and experiences segment. LSEG data shows that 28 analysts covering the stock rate it a strong buy or buy, while five give it a hold and one rates it underperform. Here's what analysts at some of Wall Street's biggest banks are saying before Disney's latest earnings report. UBS: Buy rating, $138 price target UBS recently raised its price target to $138 from $120, implying upside of nearly 16% from Disney's Monday close. "We expect F3Q results to highlight resilient demand at the Parks and similar improvement in [direct-to-consumer] profitability, supporting a continuation of double digit earnings growth. We're looking for revenues of $23.3B and segment [operating income] of $4.75B, up 1 and 12% y/y. We expect Disney to generate EPS of $1.59 in F3Q (+13% y/y) and $5.89 for the year, or 17% growth vs. guidance/Street at 16%. We remain constructive on the outlook for F26 given underlying trends at the parks, new cruise capacity, strong content pipeline and inflecting margins in DTC with upside from full control of Hulu." JPMorgan: Overweight, $138 JPMorgan recently increased its price forecast to $138 per share from $130. "We're updating Disney estimates ahead of F3Q earnings. For the quarter, we raise our segment operating income 1% to $4.56b on the shift of some Linear Networks expenses in F4Q; for the year, our [segment operating income] reduces marginally to $17.8b (+14%) on lower [content sales and licensing] contribution. Our EPS is now $1.46 for F3Q and $5.80 for F25 … From a financial perspective, we're comfortable with our F25 EPS at $0.05 above guidance, and see room for a modest increase to the outlook driven by multiple segments." Wolfe Research: Outperform, $139 The firm's price target, recently raised from $120, is roughly 16% above Disney's current price. "We raise revenue to $23.6B (prev. $23.3B) reflecting less bad advertising declines at linear networks, which we previously modeled to bake in a macro-slowdown, along with better results at Content/Licensing primarily driven by Lilo and Stitch. We keep Experiences revenue of $8.9B unchanged reflecting intra-quarter management commentary that trends at the parks remain positive … We model $1.52 of EPS (prev. $1.50) on better operating results." Morgan Stanley: Overweight, $140 Analyst Bejamin Swinburne's new price target of $140 , raised from $120, implies upside of 17% ahead. "If the macro backdrop remains healthy, we see Disney generating healthy double digit adj. EPS growth in the years ahead. Thanks to growth in its Experiences and Streaming businesses, it is poised to have rebuilt its pre-pandemic earnings base and hit new heights by FY27." Citigroup: Buy, $140 The bank raised its target price to $140 per share from $125 in early July. "Consensus estimates call for fiscal 3Q25 segment operating income of $4.55 billion, EPS of $1.48, and 1.4 million Disney+ net additions. We expect Disney to report EBIT relatively in-line with the Street, EPS modestly below consensus, and Disney+ subs slightly ahead of consensus … We expect management to reiterate components [in] its FY 2025 outlook." Bank of America: Buy, $140 "Exiting last quarter, DIS raised FY25 EPS guidance to $5.75 following a strong earnings beat. We believe this increased guidance is highly achievable as DIS was reporting earnings around the peak of uncertainty related to tariffs which limited visibility. Moreover, while DTC is expected to be an investment year, we believe there will be some discretion around the magnitude of spend, and momentum thus far in the parks (a key concern heading into the year) should be positive for underlying fundamentals." Rosenblatt: Buy, $140 "At Disney, core parks are benefiting from launches of new cruise ships, and should also benefit from the pending launch of the new fulsome-priced ESPN streaming service, helping support a historically premium valuation relative to growth … Overall, we have confidence that Disney can fare somewhat better than its guide for 16% Y/Y growth in adj. EPS to $5.75 (we model $5.93) in F2025. Our $1.63 estimate for F3Q25 is 12% above consensus." MoffettNathanson: Buy, $140 "We are increasing our F3Q 2025 forecasts driven by higher Entertainment revenue (+1%) and EBIT (+9%) estimates, primarily to reflect the stronger-than-anticipated box office performance of Lilo & Stitch plus continued improving DTC profitability … Relative to consensus, we remain slightly behind on our FY 2025 revenue forecast but ahead on EBIT as we believe Disney will exhibit stronger expense control. For FY 2026, however, we are -2% below consensus on revenue and -1% below on EBIT, culminating in a -3% EPS lower forecast. We continue to take a more conservative approach to the impact Epic Universe could pose for FY 2026 (vs. FY 2025) for Walt Disney World, as well as attempting to factor in the macro uncertainty from higher tariffs." Jefferies: Buy, $144 In June, Jefferies analyst Ed Alter upgraded shares of Disney to buy from hold and raised his price target to $144 per share from $100, implying nearly 21% upside from Monday's close. "We upgrade DIS to Buy for 4 primary reasons: 1) Now see limited risk of a 2H25 Parks slowdown from Epic Universe/Macro. 2) More positive on FY26 Cruise upside, JEFe $1B+ rev uplift. 3) Continued DTC margin expansion (0% FY24 to 13%+ by FY28E). 4) View next 6 months content & sports slate favorably, including ESPN DTC launch, Zootopia 2 and Avatar 3. DIS has failed to grow Op. Inc FY16-FY24, but we believe this dynamic is set to change."
Yahoo
28 minutes ago
- Yahoo
What to Watch Ahead of Disney Q3 Earnings
Disney (NYSE:DIS) reports third-quarter results for fiscal 2025 before the market opens on August 6. Consensus estimates call for adjusted EPS of approximately $1.45 on revenue of $23.7 billion, implying modest 2% top-line growth YoY. The stock is up 4% year-to-date and trades roughly 7% below its 52-week high of $124.70. Investor attention will focus on direct-to-consumer (DTC) margins and subscriber momentum. In Q2, Disney's DTC segment generated $336 million in operating income, up from $47 million a year earlier and added 1.4 million Disney+ subscribers. Subscriber stability and continued margin expansion will be key focus areas, as investors assess whether Disney's cost discipline is translating into lasting DTC profitability. The Experiences segment (theme parks and cruises) continues to perform well. Q2 experiences operating income rose 8% YoY to $2.5 billion, with investors assessing whether gating capacity or rising costs could pressure margins in Q3. Investors may also listen for commentary on recent releases such as Snow White and Fantastic Four, as sentiment around Disney's film strategy has been mixed and studio margins remain under pressure. With forward guidance unchanged ($5.75 adjusted EPS full year) and streaming margins expected to contribute more in H2, Disney's Q3 commentary will be critical. Management will need to demonstrate both streaming discipline and theme park profitability to support the current valuation. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
