Verizon Communications is losing its spot in the Dow Jones Industrial Average. That doesn't mean it's time for investors to drop it too.
The telecommunications giant will be replaced in the Dow by Alphabet on June 29. Following the change, the storied index will no longer include any traditional telecom names since AT&T lost its post to Apple in 2015.
Verizon stock wasn't reacting well to the news. It was down 2.6% to $45.53 in trading Wednesday, faring worse than AT&T and the S&P 500.
Yet Verizon still has the highest dividend yield among telecoms at 6.1%, well above AT&T at 5%. While Verizon's business faces considerable pressure -- and a looming threat from SpaceX's Starlink network -- its dividend looks well covered. And there's a little earnings growth in the tank.
Investors appear to be warming up to Verizon. Shares are up about 13% this year, while AT&T and T-Mobile are both down around 8%.
The company is orchestrating a turnaround under CEO Dan Schulman, a former PayPal boss. Cost cuts have included shedding 13,000 jobs. And Schulman has impressed Wall Street by simplifying Verizon's menu of plan options and improving customer service, helping to foster subscriber growth. Verizon added a net 55,000 postpaid phone subscribers in the first quarter, the first time the company delivered a positive net number in the difficult post-holiday period since 2013.
"We expect the momentum to continue," wrote Goldman Sachs analyst Michael Ng in a note Tuesday, citing improved customer service and a streamlined slate of phone and internet plans. He expects net postpaid subscriber additions of more than 1.17 million for the year. That would be above the top end of the company's 750,000-1 million forecast.
Ng rates Verizon a Buy with a price target of $56, representing 23% upside on the current price.
Much of Wall Street isn't bullish on the stock. Only 12 analysts rate it a Buy with another 17 maintaining Hold ratings, according to FactSet. The average target is $51.89, implying gains of 13%.
Yet analysts have been raising earnings forecasts. The consensus average for 2026 is a profit of $4.95 a share, up from an average of $4.79 at the start of the year. That implies year-over-year profit growth of around 5%.
While mobile service is a mature business, providing internet connections continues to be a growth area. Verizon's fiber broadband subscriber count jumped 42% to 10.8 million in the first quarter, including about two million customers from its $20 billion acquisition of Frontier Communications in January. Its "fixed wireless" business, providing high-speed internet through cellular service, grew 24% to six million customers.
The Frontier acquisition has been controversial, adding debt to the balance sheet, though Verizon says it's paid down about half of Frontier-related debt and is on track to hit leverage targets in 2027. The company says it expects about $1 billion in operating cost "synergies" from the deal by 2028. And it fits with the company's strategy of bundling phone/internet, which Verizon says reduces churn by 40% compared with stand-alone mobile.
SpaceX and the threat from satellite services are still looming. SpaceX's Starlink service recently hit 12 million subscribers, offering telecom services similar to Verizon. The customer base is now largely rural -- areas without much cell coverage or fiber-to-home networks -- but that could change as the satellite service improves.
Schulman said in May that Verizon maintains advantages, partly because it would take far more satellites to handle highly congested urban and suburban markets.
"In urban and suburban areas, terrestrial networks are 100 to 1,000 times more efficient than low earth orbit...Is there a market for that? Of course, there is," he said. "I think over the next seven to 10 years that's maybe like five million households or so. It's a real market, but it's not our market."
As for the dividend, Schulman has repeatedly described it as "ironclad." The company has made and raised its payout for 20 straight years and it looks secure.
The dividend, which costs $2.83 a year, should be easily covered by free cash flow of $4.82 per share. Verizon also recently said it spent $2.5 billion on share repurchases in the first quarter and was on track to spend another $500 million later this year.
Write to Ian Salisbury at ian.salisbury@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 24, 2026 15:26 ET (19:26 GMT)
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