Is Verizon an Undervalued High Yield Opportunity? | Verizon (VZ) Stock Analysis! |

One of the more popular high yielding dividend stocks is Verizon Communications. I think anyone who's interested in dividends whatsoever has looked at this stock before. And after getting off to a hot start in early 2026, it was trading around $39 a share and popped all the way up to over $50 a share. But we've seen a bit of a pullback, particularly in the last month, now down by around 6%. And I think with this pullback, the valuation is starting to become a bit more interesting. So there's a bit we need to dig into. Why is the stock falling? What do the dividend metrics look like? Is the dividend sustainable? And is the company now trading at a fair valuation? So, let's go ahead and start with those dividend metrics. If we jump over to the dividend breakdown sheet from ticker data and plug in the ticker, the data will load in. And like always, if you want to get access to any of the spreadsheets that you see in my videos and also get access to the ticker data add-on in Google Sheets that allows you to automatically import stock financials directly into your spreadsheet, then you can head over to tickerdata.com at the link in the description. Well, with Verizon, we can see that starting dividend yield. It's quite high, especially relative to the S&P 500. It's certainly one of the higher yielding large market cap stocks. Right now, the yield is sitting above 6.5%. And we can see there's a history of dividend growth. However, there is a caveat to this that we need to point out. Yes, the 10-year dividend cagger is around 2% and the 5 years around 1.85%. What's the issue with this? Well, take a look at inflation rates over the last three or so years. essentially every single month the inflation rate is above the rate of their dividend growth. So one of the things we have to remember in terms of dividend growth, yes, a growing dividend it's great. That's typically what we want to see. But if a stock is not growing dividends at a rate above inflation, then that's technically not dividend growth, at least not in real purchasing power terms. So keep that in mind. Technically, back in 2015, in terms of purchasing power, they were paying out more in dividends then than they are right now. So, just something for you to keep in mind. Now, with that being said, look at the free cash flow payout ratio for Verizon. It's sitting at just 57%. So, compared to a lot of other higher yielding stocks that have high free cash payout ratios, maybe 80, 90, even close to 100%. Those are definitely red flags, Verizon is sitting in a pretty strong position right now. And you'd be surprised just how many stocks that a lot of people consider safe really don't pay out sustainable dividends. I was actually writing about this over on dividendology.com the other day, but stocks like Pepsi right now the free cash payout ratio is sitting very high. If we keep scrolling down in this article, we can see the same is true for Fizer as well with a free cash payout ratio of above 100%. If we keep scrolling down, we can see Clorox is entering into dangerous territory. So just because a stock has historically been considered a solid dividend payer doesn't mean it will always be that way. However, for Verizon, the yield is high and right now that dividend looks quite sustainable and you'll see a little bit of dividend growth along the way. Now, let's talk about the valuation for a moment. As you probably know, Verizon trades at a very low PE multiple. In fact, take a look at the historical valuation multiples. Right now, they're trading at a forward PE of around 8.59. Where is that relative to how the company has historically traded? Well, it's only about 2 to 3% cheaper. Even if you look at it on a trailing 12-month basis, it's around 8.8 84, which is literally within 1% of how the company has historically traded. And I know I've mentioned this many times before, but there's typically a couple of things in general that are taken into consideration when the market is deciding what type of valuation multiple does a stock deserve to trade at. And the number one indicator is how fast is the company actually growing earnings? More specifically, earnings per share. So, if we jump over to our stock screener, let's look at Verizon. Now, when we look at Verizon and look at earnings per share, you can see it's not the most beautiful chart. It's been relatively choppy up and down, and growth really hasn't gone anywhere over the last decade. So, naturally, the valuation multiple reflects this. It's being priced like a stock that really historically speaking, doesn't grow earnings at a fast rate. However, we can see there was a point in time really when the stock ran up early in 2026 when that valuation multiple climbed higher. In fact, at one point, the company was trading at above a 10 price to earnings multiple for the first time in nearly 5 years. Now, why would that be the case for Verizon? Well, there's a couple of different things we could point out. Yes, maybe part of it is a flight to safety from AI recession proof cash flows, whatever you want to call it. But one of the things we do also have to take into consideration is when we jump over to the sensitivity model and look at Verizon. One of the cool features of ticker data is you can automatically import the average analyst EPS estimate directly into your spreadsheet and look at projected earnings growth for Verizon over the next few years. By the year 2030, the projected EPS cagger is actually close to around 7%. So that's actually quite strong relative to how Verizon has historically grown earnings. So the earnings outlook for the company, at least according to analysts, the average projections has actually improved a little bit over the last few years. That's a very positive sign and typically that's what warrants a higher valuation multiple. But like I mentioned in the last month, they've pulled back 6%. So what's going on here? What are some of the reasonings behind this in particular? Well, really, we saw all telecom stocks slip and it's interesting. It's due to something that's going on with Comcast right now. Comcast is planning to spin off its NBC, Universal, and Sky businesses underscored ongoing disruption in the media sector. This caused AT&T, T-Mobile, Verizon, Lumen Technologies, really those telecom stocks to sell off by around 5%. Why would that be the case? Well, think about what Comcast is doing. They're wanting to separate their media assets from its connectivity businesses because why? Legacy TV, as we know, is under pressure from cord cutting and streaming. If we look at Comcast's core business, we can see they're actually seeing a slight decline in revenue from Q1 of 2025 to Q1 of 2026. The core business is slowing down substantially. However, if we switch and look at content and experiences, this is the portion of the business, although it's much smaller as a whole, is growing much faster. It's seeing doubledigit revenue growth really in each segment of this business. This is why they're splitting up the business. Comcast believes there's a value creation opportunity there. But what that also tells the market is that Comcast sees its core business as a business that really deserves a very low valuation multiple. Why? Because, well, it's in decline. Revenues are going backwards. Now, obviously, Verizon's a very different type of company. They they don't have the same legacy media exposure that Comcast has anymore. They already learned this lesson years ago with their Yahoo and media assets. And today, the company is more of a pure play wireless, broadband, and enterprise connectivity business. However, the question that it does pose is that do these companies now deserve to be valued more like lower growth utility stocks. And really, that's already becoming the case. But again, here's why I think potentially this sell-off might not be fully justified or at least the sell-off is gone a little too far. Like we pointed out earlier, earnings growth is projected to start picking up. And this isn't just analyst projections. In fact, take a look at the recent earnings report from Verizon. This was released on April 27th of this year, so a few months ago. Now, if we scroll down, let's start to take a look at their full 2026 guidance. Adjusted EPS growth of around 5 to 6%. Perhaps even more importantly, especially because this is a big dividend payer, free cash flow to be at 21.5 billion or more, which is around 7% growth, which again is considerably stronger than what we've seen over the last 10 and 5 years. So, free cash flow is at about 21 12 or even higher. That's a nice growth from 2025. It's going to jump up to around right here. And with 7% free cash flow growth, naturally that means if they were to grow the dividend at 7%, then the free cash flow payout ratio would continue to stay right at 57%. Now, let me be completely clear. I don't expect Verizon to grow their dividend at 7%. At least not in the short term. But it does mean that the overall strength of this high yield dividend will continue to get even stronger. On top of this, take a look at this. This is interesting from a capital allocation perspective. Remember, another way that a company can directly reward their shareholders is not just through paying out dividends, but also by buying back shares. In Q1 of 2025, yes, they paid out about 2.9 billion in dividends, but they didn't buy back any shares. It's different in Q1 of 2026. They paid out about 2.9 billion in dividends, but they also pursued 2.5 billion in share purchases. Now, ironically enough, over the long term, this can actually increase the amount that shareholders receive in dividends on a per share basis. And the math behind it is relatively simple. Imagine that for Verizon, free cash flow stated about 20 billion in perpetuity. That's how much they generate in free cash flow every single year. But if they're outstanding shares are simultaneously decreasing, which like we saw, they've been doing this in 2026. If shares outstanding are decreasing, then the dividends on a per share basis actually increase. At the exact same time, we have to make note that share buybacks are most effective when a company is undervalued. So, let's just go ahead and address the big elephant. What does the valuation look like for this stock right now? Yes, they were trading as high as a 10p multiple earlier this year, but now that multiple has pulled back down to around 8.5, pretty much in line with the 5-year average for this company. So, really, the best way to value this stock is quite simple. We're going to use a dividend discount model. It's a very tried and true method for these companies that historically have continued to pay out dividends. So, let's plug in Verizon into our stock valuation sheet. Now, before we actually jump into the model, take a look at this. Verizon's free cash flow yield is already sitting at $11.7%. In other words, if you invested $100 into the stock, it's going to generate around $1.7 in free cash flow. Now, typically when you're investing in high growth stocks, that free cash flow yield will be substantially lower, but the idea is they'll continue to grow free cash flow at a high rate. For Verizon, it's already high because the expectation isn't that free cash flow will continue to grow at a strong rate. However, as we saw, it's projected to grow at about 7% this year. That's quite a bit stronger than they have been historically speaking. So, just remember that. Now, if we jump over to our dividend discount model again, the idea is to value the stock based on how much they're paying out in dividends and how much that dividend will actually grow in the future. So, just for reference, if Verizon was able to never grow their dividend again, it stayed at 0%, the stock is worth around $32 a share. So, naturally, the market is pricing in dividend growth. So, based on the information we know, how fast will Verizon grow dividends in the future? Historically speaking, it's been close to around 2%. But as we've also seen from management and from analyst estimates, earnings growth is actually expected to pick up. So, let's not be overly optimistic. That's not typically how I like to do these models. Let's assume dividend growth is slightly above 2%. Maybe it hits about 2.5%. What we can see all of a sudden is we're looking at a dividend discount model price per share of $46.51 implying around 10% upside even if they achieve slightly higher at 2.6. 75% the upside is back to 15% and at 3% dividend growth you're looking at 20% upside around 21% with a fair value of $51. And the reality is obviously it's hard to know what earnings growth past 5 or 10 years will actually look like for this stock. But in the short term we should see earnings growth pick up. We should see free cash flow growth pick up making this a realistic possibility particularly because the free cash payout ratio is already just sitting at 57%. And right now the company is actively pursuing share buybacks which is not typical for the company. They really haven't done a lot of that over the last decade which again like I mentioned earlier can actually speed up the rate at which dividends on a per share basis actually grow. And what's interesting is if you look at the average price target it's right at $50.25 about 19% upside. So naturally what that tells us is these analysts are pricing in dividend growth of somewhere around 3% as well. this is what they believe will be the base case generally speaking. So with that being said, who is Verizon stock actually for? And to be completely transparent, I don't own it in my portfolio, and I really don't plan on adding it. Why? Because right now, I'm a long-term dividend growth investor. I look for stocks growing free cash flow at a high rate, so in turn, they can grow dividends at a high rate. However, if you're someone who's looking for immediate yield dividends right now, you're looking to potentially live off your income in the next 5 or so years, then Verizon is a pretty interesting opportunity. I think at current prices, you won't see a whole lot of volatility out of this position. In fact, if we jump back over to our stock screener and come down here, you can see the beta for this stock is just 0.24. So, in other words, the volatility of Verizon stock relative to that of the market is exceedingly low. It's very low. So, it's a low volatile stock. It has very predictable cash flows, stable cash flows for the most part that should be growing in the future with ample dividend coverage. In my book, that's a pretty good opportunity for high yield investors. Management has also indicated there may be some opportunities in the future where AI can help lower cost through customer service work. Now, if you're a user of Verizon, that probably sounds scary, but long-term it could be good for the business. So, go ahead and let me know what you think of Verizon stock in the comments down below if you plan on buying or selling. And again, like always, if you'd like to download any of these spreadsheets and get access to the ticker data add-on in Google Sheets that allows you to automatically import stock financials directly into your spreadsheet, then you can head over to tickerdata.com at the link in the description. So, with all that being said, thank you guys so much for watching and please don't forget to like and subscribe to the