Telecom & Wireless

How Verizon and AT&T Expectations Differ From 2015 to 2019

Again, 24/7 Wall St. wanted to look elsewhere rather than only focusing on a report focused mostly on credit ratings instead of what the expectations are for equity investors.

It is no secret that AT&T has a higher dividend yield than Verizon, but investors might want to notice that the relative yield comparison is now closer than it has been in recent years. AT&T yields 4.89%, versus 4.58% for Verizon. These are both very high dividend yields, and the reality is that many income investors are going to pick apart the companies to see which they prefer if the yields have just a 0.3% difference.

A look at Thomson Reuters shows that AT&T’s revenue of $146.8 billion from 2015 is expected to be $164.6 billion in 2016, and that is expected to be closer to $172.5 billion in 2019. That puts the 2019 versus 2015 growth at an expected 17.5% over the four-year period.

Thomson Reuters also showed Verizon’s revenue of $131.6 billion in 2015 going down slightly to $126.3 billion in 2016. Still, it sees revenue growing to $130.2 billion in 2019. That is effectively flat revenue expectations, but that does not include larger deals including or after Yahoo, and that leaves room for growth.

At $39.25, AT&T shares are down 10.6% from the 52-week high of $43.89. AT&T’s consensus analyst price target of $42.61 implies an upside of 8.3%, plus that 4.89% dividend, in a total return. AT&T has a market cap of $241 billion, and its total return so far in 2016 has been a gain of 19.9%. Thomson Reuters shows that AT&T’s dividend of $1.89 per share from 2015 is expected to grow to $2.07 per share in 2019 (10% growth in total).

Verizon’s recent share price of $50.43 is down 11.4% from its 52-week high of $56.95. Verizon’s consensus price target of $54.63 implies upside of 8.3%, and then there is the 4.58% yield to add on for a total return expectation. Verizon’s market cap is $205 billion, and its total return so far in 2016 has been 14%. When 24/7 Wall St. ran its bullish and bearish case on Verizon for 2016, the view was for an expected 13.3% total return. Thomson Reuters shows that Verizon’s dividend of $2.23 per share in 2015 should grow to $2.45 per share in 2019 (10% total dividend growth).

As you may have guessed, the paths of AT&T and Verizon may be different in how each plans to achieve growth. Still, the current market conditions are signaling that the expectations, at least for the equity investors, may be quite similar here. Perhaps the 5G build-outs ahead and pending or unknown acquisitions will change how things now look.

Expectations for each telecom giant may change through earnings season, and we should keep in mind that the highly expected 5G roll-outs probably will not start really adding into new revenues until 2018 to 2022.