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Linked here is a detailed quantitative analysis of Verizon Communications Inc. (VZ). Below are some highlights from the above-linked analysis:

Company Description: Verizon Communications Inc. is the largest U.S. wireless carrier, Verizon also offers wireline and broadband services primarily in the northeastern U.S.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

VZ is trading at a discount to 1.) and 3.) above. Since VZ's tangible book value is not meaningful, a Graham number can not be calculated. When also considering the NPV MMA Differential, the stock is trading at a 12.5% discount to its calculated fair value of $37.29. VZ earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section, there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

VZ earned one Star in this section for 3.) above. VZ earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1984 and has increased its dividend payments for 19 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

VZ earned a Star in this section for its NPV MMA Diff. of $2,281 This amount is in excess of the $1,600 target I look for in a stock that has increased dividends as long as VZ has. The stock's current yield of 8.01% exceeds the 3.75% estimated 20-year average MMA rate.

Peers: The company’s peer group includes: AT&T Inc. (T) with a 7.8% yield and Lumen Technologies, Inc. (LUMN) with a 0.0% yield.

Conclusion: VZ earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section, and earned one Star in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks VZ as a 3-Star Hold stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $37.40 before VZ's NPV MMA Differential decreased to the $1,600 minimum that I look for in a stock with 19 years of consecutive dividend increases. At that price, the stock would yield 7.0%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,600 NPV MMA Differential, the calculated rate is 0.0%. This dividend growth rate is lower than the 1.5% used in this analysis, thus providing a margin of safety. VZ has a risk rating of 2.25 which classifies it as a Medium risk stock.

For many years VZ has enjoyed a dominant market share despite premium pricing compared to its major rivals. The company has felt pressure as its competitors begin to compete more on price. The company enjoys a perception of network quality and pricing power over its suppliers. The stock is currently trading at a premium to my calculated fair value of $37.82. Its valuation keeps me from adding to my position at this time.

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