Verizon, T-Mobile or AT&T Stock: Which Is the Best Investment?

Verizon, T-Mobile and AT&T are known as the three major players in the telecommunications industry. You might have already decided on which one you prefer when it comes to your phone service — but do you know which telecom company is the smartest investment in 2024?

This guide will break down the pros, cons and details of these three stocks to help you make the right choice. Here’s what you need to know before you buy.

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Company Overviews

AT&T, Verizon and T-Mobile are direct competitors in the U.S. telecommunications industry. Although they offer similar services, they present different investment opportunities. Here’s a quick overview of each company’s stock.

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Verizon

Verizon (VZ) provides technology, entertainment and information products through its subsidiaries. The company was incorporated in 1983 and currently operates through two segments: Verizon Consumer Group and Verizon Business Group.

Verizon is a popular mobile phone service provider and enjoys nationwide brand recognition. It generates more than $180,000 per employee in profits after tax. Verizon’s stock is relatively affordable and offers a good dividend yield compared to industry competitors. However, Verizon has also taken on significant long-term debt over the past decade, totaling more than $136 billion as of March 2024.

AT&T

AT&T (T) is another well-known telecommunications company that operates in two segments: Communications and Latin America. The Communications segment provides technology and data services, while the Latin America sector focuses on prepaid and postpaid wireless services in Mexico, partially through the Unefon brand.

AT&T’s stock performance is historically steady. It currently offers a dividend yield of 6.48%, which is higher than the telecom industry’s standard of 4.65%. However, AT&T is not expected to undergo significant growth in the near future, meaning investors shouldn’t expect high capital growth.

T-Mobile

T-Mobile (TMUS), which was founded in 1994, provides mobile communications services in the U.S., Puerto Rico and the U.S. Virgin Islands. Its services include voice and messaging data plans, prepaid and postpaid plans and wireless tech, like smartphones and tablets.

As a slightly smaller player in a highly saturated market, T-Mobile has fewer marketing resources than Verizon and AT&T and has resorted to non-traditional marketing tactics, such as attacking its competitors on social media. Thanks to its scrappiness, the company is currently in a period of rapid revenue growth, a benefit for investors looking for a high ROI.

Comparing Telecom Stocks

Here’s a look at how these three stock options stack up against one another, comparing a few key factors: stock price, dividends, debt and free cash flow.

Stock Price

Here’s a comparison of the 52-week price range for each stock as of late May 2024:

  • VZ: $30.14 to $43.42
  • T: $13.43 to $18.16
  • TMUS: $124.92 to $168.71

Dividends

The dividend yield is a measure of a company’s annual dividend payout in relation to its stock price. While this isn’t necessarily an indicator of a stock’s performance, it can tell you how much you’ll earn in annual dividends per share. Here are the current dividend yields for these three telecom companies:

  • VZ: 6.8%
  • T: 6.48%
  • TMUS: 1.54%

In terms of straight-up cash value, Verizon’s annual dividends are comparable to T-Mobile’s. However, remember that Verizon’s price per share is much lower — so you’ll get more bang for your buck with Verizon in terms of dividends alone.

Debt

As discussed above, Verizon has more long-term debt than the other two companies, at more than $136 billion as of March 2024. AT&T’s long-term debt for the same period was $125.7 billion, while T-Mobile’s debt is much lower at $77.8 billion.

High debt means a large portion of a company’s revenue will go toward repayment, which limits its free cash flow.

Free Cash Flow

Free cash flow is a measure of a company’s profits after it pays its operating expenses. It’s an important factor when you’re comparing stocks, because it shows how much cash a company has available for investing in growth opportunities, meeting its capital gains goals and generating returns for shareholders.

All three companies have made strides in their free cash flow in recent years. According to some reports, Verizon has displayed impressive financial resilience through the first half of 2024 and expects continued revenue growth through the rest of the year. AT&T has also outperformed expectations this year.

However, because of T-Mobile’s low debt and rapid growth, this stock still outperforms its competitors in terms of free cash flow.

Why T-Mobile Is the Best Investment

Out of the three options, T-Mobile likely offers the most promising long-term returns. This company has the most manageable debt compared to its competitors, meaning it has more flexibility to continue boosting its revenue and generating value for its shareholders. Many experts expect T-Mobile’s stock to perform better than its competitors in the long term.

That said, each of these stocks has its own advantages. Verizon offers a better dividend yield than T-Mobile, and AT&T is a reliable, low-cost option for risk-averse investors. These features might make them appealing options for certain investors — but when it comes to the big picture, T-Mobile is likely a better long-term investment.

Should You Invest in T-Mobile Stock Right Now?

If you want to invest in the telecom industry, T-Mobile may be a smart choice. However, just because it’s outperforming its competitors doesn’t mean it’s the best investment to add to your portfolio. Some of the top stocks of 2024 include Alphabet, Meta, Broadcom and UnitedHealth — T-Mobile doesn’t make the list.

On top of that, T-Mobile’s stock is currently pricey. New investors and those on a budget might want to wait until the price comes down before buying. There’s nothing wrong with investing in T-Mobile today if it’s right for you, but don’t feel pressured to run out and buy this stock right now.

More From GOBankingRates

This article originally appeared on GOBankingRates.com: Verizon, T-Mobile or AT&T Stock: Which Is the Best Investment?

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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