Verizon Communications Inc. (VZ) has recently increased its quarterly dividend by 2.5% to 50 cents per share from 48.8 cents. The increased dividend equates to $2.00 per share on an annualized basis and will be paid on November 1, 2011, to shareholders of record as of October 7.
Verizon remains committed to offer incremental returns to its shareholders via dividends and by leveraging a healthy free cash flow. The company distributed $5.3 billion and $5.4 billion as dividends to its shareholders in 2009 and 2010, respectively. For the first half of 2011, Verizon paid a total dividend of $2.8 billion.
Verizon continues to benefit from its superior network coverage and aggressive marketing skills that have fostered operational growth and sustainability in a highly competitive telecom market, which has giant players like AT&T Inc. (T).
Further, continued strength in the wireless segment and improved revenue trends in wireline have fostered the company’s earnings and cash flows to support long-term growth for the company.
In the wireless business, the company continues to be the market leader in providing wireless voice and data communication services in the U.S. given 3G and fourth-generation Long-Term Evolution (4G LTE) mobile broadband network expansion.
Verizon provides 4G LTE services in approximately 102 markets, covering over 160 million people. By the end of this year, the company expects to expand its services to more than 175 markets covering 185 million people. Additionally, the company plans to expand its 4G network to its entire nationwide 3G footprint by the end of 2013.
The company remains committed to expand its coveted fiber-to-the-premises (FTTP) network (delivering FiOS Internet and FiOS TV services to customers), representing an integral part of the carrier’s long-term growth strategy. The company focuses on gaining market share through the deployment of strategic service offerings, including expansion of VoIP and international Ethernet capabilities, managed network and cloud services, and security solutions. We believe Verizon will drive wireline revenue growth and margin expansion based enterprise strategic services as well as cost-reduction efforts.
Going forward, we believe Verizon will continue to achieve growth as well as profitability with a focus on gaining share in other areas such as the retail post-paid market, increasing penetration of smartphones, and selling more Internet devices such as tablets.
We currently maintain a long-term "Neutral" recommendation on Verizon, supported by a Zacks #3 (short-term 'Hold') Rank.
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