Benzinga - by Surbhi Jain, .
Verizon Communications Inc‘s (NYSE:VZ) shares have been trading higher since it reported better-than-expected Q3 financial results.
We took a dive into the business to identify three key catalysts buoying the stock right now.
The New York-based company has invested heavily in broadband, fiber, and cellular assets, including a massive 5G infrastructure. This has led to growth in wireless retail postpaid connections, with a surge in postpaid connections.
The average revenue per account for wireless retail postpaid customers has risen by nearly 5% to $133.
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Additionally, Verizon’s postpaid phone churn rate has decreased, lower than that of T-Mobile (NASDAQ:TMUS) , indicating customer satisfaction and a strong market position.
Cash Flow: Verizon has seen a significant increase in free cash flow, reaching $6.7 billion and $14.6 billion in year-to-date. This is largely due to a reduction in working capital, fewer equipment upgrades, and lower inventory levels.
The company’s high-capex cycle is ending, allowing for a healthier balance between investments and cash generation. With Capex decreasing from 15.5% to 12.3% of revenue, Verizon is poised to maintain strong free cash flow levels.
If Verizon’s capital expenses return to normal levels, the company could sustain dividend payments and make significant debt repayments. This may result in an annual dividend payout of $11 billion and an $8 billion reduction in debt.
Competitiveness: Verizon has seen an increase in its gross margin as a result of its aggressive pursuit of infrastructure development. With a gross margin of 58.69%, Verizon is already close to AT&T Inc (NYSE:T) (59.11%) and is poised to catch up to T-Mobile (62.20%), indicating its increasing competitiveness.
Furthermore, when compared to rivals like AT&T (7.06%) and T-Mobile (0.44%), Verizon has the highest dividend yield of 7.41%. Given the company’s dedication to providing value to its shareholders, this higher dividend yield may be an alluring offer for investors.
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