Verizon is a New York-listed telecommunications company with a US$200 billion ($255 billion) market cap that operates both consumer- and business-focused segments. The consumer segment accounts for over three-quarters of overall revenue and provides wireless and wireline communications services and products, including broadband and fibre-optic services. The business segment covers products and services such as corporate networking solutions, security and managed services, fixed wireless access for businesses, public-sector customers, and wireless and wireline carriers, mainly in the US.
When fear and uncertainty hit the stock market, capital usually flows towards safe-haven assets or safe stocks within the equity asset class. What is a safe or safe-haven stock in this context? It is generally businesses that are likely to maintain or retain their value despite prevailing economic and market conditions. These are companies that provide goods and services that consumers still demand because they are essential, and not discretionary. Telecommunications is arguably an essential industry, particularly consumer telecommunications, because the need for communication, especially wireless communication in today’s age, is almost compulsory. For an investor seeking to diversify into safer options, telecommunications is an attractive call, especially if it pays consistently good dividends across business cycles.
The company in focus will be Verizon Communications. As global stock markets remain volatile, many investors have pulled out of stocks in favour of safer asset classes, such as gold. Verizon has historically performed well across various business cycles, which is one of the main reasons it has consistently paid attractive dividends over a long period. Verizon is a great fit for an investor profile focused on not-so-volatile stocks that pay good dividends. Since beta measures a stock’s volatility relative to the S&P 500, Verizon’s monthly one-year, three-year, five-year and 10-year betas are well below the market beta of 1: 0.50, 0.56, 0.55 and 0.60, respectively.
