Verizon (VZ): 5G LTE Plans on Track, Competition Rife

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On Sep 7, 2016, we issued an updated research report on Verizon Communications Inc. VZ . The company raised its quarterly dividend by 1.25 cents per share to $57.57, taking its annual dividend yield to 4.4%. Notably, this is the 10th consecutive year of a dividend hike by Verizon.

Verizon is also actively investing to expand and enhance its network footprint. With the company targeting to launch the super-fast 5G wireless network in 2017, it has decided to acquire and install dark fiber-based network throughout its footprint in order to strengthen the existing 4G LTE network and make the transition to 5G easier. Additionally, Verizon has entered into an agreement with Yahoo Inc. YHOO to acquire the core businesses of the latter for $4.83 billion. This will help the company gain traction in the mobile media and advertising space.

On the flip side, the U.S. wireless is almost saturated. Smaller companies like T-Mobile US Inc. TMUS and Sprint Corp. S are aggressively launching products, increasing pricing competition to a great extent. Moreover, the company expects its earnings to be flat on a year-over-year basis in 2016 as it does not foresee enough variables for growth. However, it expects to return to growth in 2017. Meanwhile, the price transformation drive in the industry is likely to deal a heavy blow to the company in the near term.

The Bottom Line

Verizon provides a rare mix of steady income and capital gains, which make it a safe bet for investors. However, tepid earnings projection and intensifying competition raise caution.

Verizon currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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

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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