AT&T (NYSE:T) and Verizon Communications (NYSE:VZ) are both large-cap computer and technology companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, earnings, profitability, institutional ownership, dividends and risk.
Dividends
AT&T pays an annual dividend of $2.08 per share and has a dividend yield of 7.2%. Verizon Communications pays an annual dividend of $2.51 per share and has a dividend yield of 4.4%. AT&T pays out 58.3% of its earnings in the form of a dividend. Verizon Communications pays out 52.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. AT&T has increased its dividend for 37 consecutive years and Verizon Communications has increased its dividend for 13 consecutive years. AT&T is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Insider and Institutional Ownership
51.2% of AT&T shares are held by institutional investors. Comparatively, 64.9% of Verizon Communications shares are held by institutional investors. 0.1% of AT&T shares are held by company insiders. Comparatively, 0.1% of Verizon Communications shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.
Volatility and Risk
AT&T has a beta of 0.7, suggesting that its stock price is 30% less volatile than the S&P 500. Comparatively, Verizon Communications has a beta of 0.44, suggesting that its stock price is 56% less volatile than the S&P 500.
Profitability
This table compares AT&T and Verizon Communications' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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AT&T | 6.42% | 12.27% | 4.42% |
Verizon Communications | 14.76% | 32.15% | 6.87% |
Valuation and Earnings
This table compares AT&T and Verizon Communications' revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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AT&T | $181.19 billion | 1.13 | $13.90 billion | $3.57 | 8.08 |
Verizon Communications | $131.87 billion | 1.80 | $19.27 billion | $4.81 | 11.91 |
Verizon Communications has lower revenue, but higher earnings than AT&T. AT&T is trading at a lower price-to-earnings ratio than Verizon Communications, indicating that it is currently the more affordable of the two stocks.
Analyst Recommendations
This is a summary of current recommendations and price targets for AT&T and Verizon Communications, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
---|
AT&T | 4 | 7 | 13 | 0 | 2.38 |
Verizon Communications | 0 | 12 | 8 | 1 | 2.48 |
AT&T presently has a consensus price target of $32.3333, indicating a potential upside of 12.15%. Verizon Communications has a consensus price target of $61.90, indicating a potential upside of 8.08%. Given AT&T's higher probable upside, analysts clearly believe AT&T is more favorable than Verizon Communications.
Summary
Verizon Communications beats AT&T on 10 of the 17 factors compared between the two stocks.