AT&T (NYSE:T) and Verizon Communications (NYSE:VZ) are both large-cap computer and technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, dividends, profitability, earnings, valuation, institutional ownership and analyst recommendations.
Analyst Ratings
This is a summary of recent ratings and price targets for AT&T and Verizon Communications, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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AT&T | 4 | 4 | 10 | 0 | 2.33 |
Verizon Communications | 0 | 11 | 7 | 0 | 2.39 |
AT&T currently has a consensus price target of $31.3889, indicating a potential upside of 4.73%. Verizon Communications has a consensus price target of $62.0556, indicating a potential upside of 7.89%. Given Verizon Communications' stronger consensus rating and higher possible upside, analysts plainly believe Verizon Communications is more favorable than AT&T.
Dividends
AT&T pays an annual dividend of $2.08 per share and has a dividend yield of 6.9%. 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 14 consecutive years. AT&T is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Insider & 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 insiders. Comparatively, 0.1% of Verizon Communications shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.
Valuation & Earnings
This table compares AT&T and Verizon Communications' gross 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 | 1.18 | $13.90 billion | $3.57 | 8.39 |
Verizon Communications | $131.87 billion | 1.81 | $19.27 billion | $4.81 | 11.96 |
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.
Volatility and Risk
AT&T has a beta of 0.7, indicating that its share price is 30% less volatile than the S&P 500. Comparatively, Verizon Communications has a beta of 0.44, indicating that its share 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% |
Summary
Verizon Communications beats AT&T on 10 of the 16 factors compared between the two stocks.