Verizon Results Trigger Rebound in High-Yield Stock

Key Points

• Verizon's Q3 results affirmed a robust dividend payment and distribution growth outlook.
• The distribution CAGR isn't much—about 2%—but the 7% yield in late October offsets it.
• Analysts and institutional trends support and lift this market, pointing to a minimum 20% stock price increase in 2026.

Verizon’s NYSE: VZ analyst trends revealed a hint of caution ahead of the Q3 release, which the results say was unwarranted. The caution, inspired by a sudden CEO change, helped trigger a significant share price correction that set the market up for a rebound, which the Q3 release has now triggered.

The takeaway is that uncertainty remains due to the CEO change, but all other metrics point to higher share prices for this industry-leading company. This means potentially volatile price action for investors in the upcoming months, with an uptrend in peaks and troughs that could top out more than 20% above the late-October price. And this is in addition to the 7% dividend yield. 

Verizon’s Mixed Quarter Sparks Rebound in Share Price 

Verizon struggled in Q3 with revenue growing by 1.5% but falling short of MarketBeat’s reported consensus by a significant margin. The $33.8 billion in net revenue fell short by nearly half a billion dollars or 140 basis points, with strength in the consumer segment offset by weakness in business. 

The consumer segment grew by 2.9% while business revenue contracted by 2.8%. Despite the business segment's weakness, internal metrics indicate strengths in critical areas. Total wireless grew by 2.1%, led by a 5.2% increase in equipment sales. Within wireless, consumer revenue grew by 2.4% and business revenue by 0.7%, while broadband and fixed broadband revenues also increased. 

Margin is another area of strength that is driving market sentiment. The company’s cost-controlling efforts have worked; operating expenses have fallen, driving accelerated growth in operating and net earnings, cash flow, and free cash flow. Operating profits increased by 36.8%, net by 18%, and adjusted earnings by a comparable amount. The $1.21 in adjusted EPS also outperformed the consensus despite the top-line weakness, highlighting the impact of the improvement. Free cash flow is up 9% YTD, underpinning a healthy dividend outlook. 

Verizon’s guidance is also favorable. The company forecasts wireless growth to accelerate in the current quarter, driving a 2.8% yearly increase. Similarly, earnings are forecast to grow at a nearly-3% pace, keeping the dividend and distribution growth outlook unchanged. 

As it stands, Verizon isn’t increasing its payment at a robust pace, but the 2% CAGR is sustainable and has it on track for inclusion in the Dividend Aristocrats index within a few years. The guidance may also be cautious, given the new CEO’s commitment to “take bold and fiscally responsible action to redefine Verizon’s trajectory at this critical inflection point.”

Verizon Uses Improved Cash Flow for More Than Dividends

Verizon’s improved cash flow supports more than just distribution growth. The company is also reducing its debt, having paid down roughly 5.3% of it over the past year. The net result is that assets are growing and debt is falling, providing a lever for shareholder value. The visible impact is shareholder equity, which increased by 5% on a YTD basis and nearly 9% year-over-year. 

The price action following the release reflects the good news and analysts' and institutional support. The institutions have been accumulating the stock aggressively, buying at approximately $2.50 per $1 sold, and analysts' sentiment has firmed. Although the pre-release trend included several downgrades, the data trend is favorable to investors, including increasing coverage.

The downgrades aligned with the consensus, which is a Moderate Buy with a 20% upside potential. The consensus price target is also noteworthy, as it is up from last year and has remained steady over the preceding 90 days, reflecting analysts' confidence in the forecast.