Probably the most carefully watched metric for Verizon Communications (VZ -2.41%) throughout earnings season is not the corporate’s income or income. As a substitute, it tends to be its postpaid telephone subscriber numbers. Postpaid subscribers have wi-fi plans which are billed month-to-month, versus pay as you go subscribers, who pay for his or her companies upfront.
Pay as you go subscribers usually usually are not as prosperous, and the enterprise has rather more churn. In the meantime, its shopper and enterprise wireline companies are in decline. Broadband is a development enterprise, however the focus nonetheless tends to be on its core postpaid wi-fi enterprise, as that is the gateway to its different choices.
On the postpaid wi-fi entrance, the corporate disenchanted. After including 568,000 wi-fi postpaid telephone internet additions in This autumn 2024, it misplaced 289,000 in Q1 2025. The primary quarter tends to see churn; in Q1, it misplaced 114,000 postpaid telephone subscribers final yr. Nonetheless, the decline was worse than the lack of 197,000 subscribers that analysts have been anticipating.
A lot of this seems to stem from value hikes, as the corporate’s whole wi-fi service income rose 2.7% to $20.8 billion regardless of the churn in clients. Nonetheless, the corporate mentioned that it noticed mid-single-digit shopper postpaid telephone gross additions in March and that its efficiency so far in April has been sturdy. It famous that its new three-year value lock and free telephone assure have been beginning to resonate with clients.
It additionally highlighted its new myPlan and myHome plans, which permit clients to customise their plans and add perks, reminiscent of discounted streaming companies or limitless cloud storage. myPlan is for cellular clients, whereas myHome is for broadband clients.
Broadband continued to be an space of energy in Q1, with 339,000 internet additions within the quarter. This included 45,000 Fios web internet additions and 308,000 fastened wi-fi additions. General, it mentioned whole broadband connections elevated by 13.7% yr over yr to 12.8 million, with 4.8 million of these being fastened wi-fi entry subscribers.
Picture supply: Getty Photos.
It plans to ship 650,000 incremental Fios passings this yr whereas persevering with to increase its C-band deployment. C-band is a wi-fi spectrum that Verizon is utilizing to ship its fastened cellular broadband resolution and improve its cellular wi-fi resolution. C-band supplies broadband web service to areas that do not have conventional infrastructure.
General, Verizon continued to ship regular outcomes. Its total income rose by 1.5% to $33.5 billion, whereas its adjusted EPS elevated 3.5% to $1.19. That was simply forward of the analyst consensus for adjusted EPS of $1.15 on income of $33.3 billion. Adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA), in the meantime, rose 4.1% to $12.6 billion.
Trying forward, Verizon maintained its full-year 2025 steerage. It continues to count on wi-fi income development to be between 2% and a pair of.8% and for adjusted EPS to extend by 0% to three%. The corporate tasks working money movement to be between $35 billion and $37 billion after spending about half of that on capital expenditures (capex) to lead to free money movement between $17.5 billion and $18.5 billion.
A dividend darling
One of many issues that the majority attracts traders to Verizon is its dividend. It has a sturdy ahead dividend yield of about 6.4%, which is a pleasant payout on this atmosphere.
The dividend stays effectively lined, with the corporate paying $2.85 billion in dividends in Q1 whereas it generated $3.63 billion in free money movement. That is good for an almost 1.3x protection ratio. Over the previous 12 months, it is generated free money movement of $18.73 billion and paid out $11.03 billion in dividends, good for a 1.8 instances protection ratio. That offers the corporate loads of room to proceed to each spend money on its enterprise and improve its dividend shifting ahead.
The corporate’s steadiness sheet additionally stays in stable form with a leverage ratio on unsecured debt (internet unsecured debt/trailing-12-month adjusted EBITDA) of two.3.
With Verizon forecasting $17.5 billion to $18.5 billion in free money movement this yr, the corporate has a large cushion to proceed to extend its dividend, even when a weaker financial atmosphere negatively impacts its outcomes.
Is it time to purchase the inventory?
Whereas Verizon’s current value hike induced some elevated churn in the latest quarter, postpaid wi-fi subscriber additions seem like they’ve been again on monitor for the final couple of months. In the meantime, its three-year value lock and telephone improve plan appears like a beautiful providing that may drive subscriber development.
On the similar time, the corporate continues to do effectively by including broadband clients. Its fastened wi-fi C-band providing permits it to focus on households in areas with out fiber or cable broadband companies. It is usually a pleasant different possibility for patrons who’ve minimize the twine with cable however who’re nonetheless beholden to their cable firm’s broadband choices.
Turning to valuation, Verizon trades at a ahead price-to-earnings (P/E) ratio of 9 based mostly on 2025 earnings estimates, which is effectively under the almost 13 instances a number of of AT&T. With very comparable total development metrics as AT&T, I feel Verizon is the higher purchase and stays a stable, defensive dividend inventory.
I would not get caught up in a single quarter of weak postpaid subscriber development, as the general image at Verizon stays stable.
