Verizon’s Earnings Disappoint; Dividend Doesn’t




Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter…

Your own personalized stock watchlist!

It’s a 100% free Motley Fool service…


Click Here Now

Verizon (NYSE: VZ  ) released its fourth-quarter earnings statement today, and a quick look at its share price — dropping almost 3% in the first half-hour of the day — will tell you it wasn’t received well. But how bad could it really be? After all, it did show company-record quarterly revenue growth of 7.7% year-over-year.

First off, Verizon’s adjusted EPS (non-GAAP) of $0.52 for its consolidated operations is only a penny less than the estimate that Businessweek‘s poll of analysts came up with. But that EPS number is an adjustment upward to account for a $0.71-per-share loss the company took for non-cash pension items – that’s a serious impact.

Breaking Verizon’s earnings down into its two main segments, wireless and wireline, will give us a better picture of the quarter.

Wireless
Total operating revenues for Verizon Wireless for the quarter were $18.25 billion, an increase of 13% over the same quarter last year. That was helped by the net gain of 1.5 million retail subscribers, of which 1.2 million are the coveted postpaid (on contract) customer.

But in spite of those gains, operating income was down almost 11% over that same period. Some of this can be attributed to the substantial amount of the iPhone’s cost that Verizon – as well as ATT (NYSE: T  ) and Sprint Nextel (NYSE: S  ) — have to write off as a subsidy to lure iPhone-craving subscribers. The paradox here is that the more iPhones they sell, the thinner their operating margins becomem.

One thing to remember about the Verizon Wireless segment of Verizon is that it is a joint venture between Verizon  and Vodafone (NYSE: VOD  ) , with Verizon owning 55%. Verizon Wireless has generated enough cash that will payout a $10 billion dividend (split 55/45) this month to its parent companies.

Wireline
Verizon managed to slow down its rate of losing fixed-line phone customers, but it’s a growing problem area for all wireline providers as mobile phone users drop their home phone service. Although the company was able to post a net increase in FiOS Internet and video subscribers, total wireline operating revenues were down 1.5% over the same quarter last year, and down 1.3% year-over-year.

Bottom line
Even though Verizon disappointed the analysts, and in spite of its iPhone subsidy costs and wireline weakness, Verizon Wireless is still far ahead of all other wireless providers in 4G LTE coverage. It was also able to increase its wireless spectrum holdings, unlike rival ATT, which got itself stuck in a nine-month long regulatory quagmire in its quest to annex T-Mobile.

And don’t forget Verizon’s $0.50-per-share quarterly dividend (a projected 5.2% yield), which it is still in a strong position to pay with a free cash flow to dividend payout ratio of 41% for the year.

Remember, dividends provide a nice buffer for stock market volatility, but Verizon isn’t the only great dividend-payer out there. For more stocks that can give investors a stronger sense of security, get the special report prepared by The Motley Fool Stock Advisor newsletter team: “Secure Your Future With 11 Rock-Solid Dividend Stocks.” It’s free, so click here to access your copy while it’s still available.

<![CDATA[

.eCapForUnregisteredUsersTestCell_eCapReplacement { background: none repeat scroll 0 0 #FFFFFF !important; border: medium none !important; }
#content div.ecap, #content div.ecapReplacement { background: none repeat scroll 0 0 #FFFFFF !important; border: medium none !important; }
]]>

The Collapse of the Euro
Europe is only weeks away from economic collapse, insists a former IMF chief. Yet you probably haven’t heard the whole story: You can protect yourself and even profit from this looming catastrophe if you move fast enough…

Discover your chance to profit now. Enter your email address below to receive your copy of “The Investor’s Guide to Shorting the Euro.” Developed by the expert analysts of Motley Fool PRO, this report is yours free for a limited time. Enter your email address now.

Other articles you might like;

Article source: http://www.fool.com/investing/general/2012/01/25/verizons-earnings-disappoint-dividend-doesnt.aspx

Related posts:

  1. Earnings Preview: Verizon to Report 3Q Results
  2. In annual ritual, Verizon raises dividend
  3. Earnings Preview: Verizon to report 3Q results
  4. Earnings Preview: Verizon to report 3Q results
  5. Verizon dividend setback for Vodafone – FT