New York City-based Verizon Communications Inc. (VZ) provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies. Its segments include Verizon Consumer Group and Verizon Business Group. In comparison…
Armonk, N.Y.-based International Business Machines Corporation (IBM) is a technology company that operates in the cloud and cognitive software; global business services; systems; and global financing segments. It also designs advanced semiconductors in partnership with IBM research.
Since the beginning of the year, the benchmark stock market indexes have been correcting, driven by surging market volatility due to U.S.-Russia tensions over Ukraine, multiple interest rate hikes planned by the Fed, and multi-decade high inflation. Dividend-yielding stocks are often considered an efficient way to side-step market volatility because they offer regular income in the form of dividends in addition to capital appreciation.
Over the last three years, VZ’s dividend payout has grown at a 2% CAGR. Its four-year average dividend yield is 4.4%, and its current payout translates to a 4.7% yield. In comparison, IBM’s dividend payout has grown at a 2.2% CAGR over the last three years. Its four-year average dividend yield is 4.8%, and its current payout translates to a 5.4% yield.
VZ stock has gained 7.7% in price over the past three months, while IBM has gained 3.8%. However, in terms of past year performance, IBM is the clear winner with 5.2% gains versus VZ’s 3.2% decline.
Which is a better stock to buy now? Let’s find out.
Latest Developments
On Feb. 22, 2022, VZ agreed with Audi of America to bring 5G connectivity to the automaker’s U.S. lineup. The collaboration will enable 5G Ultra-Wideband connectivity in Audi vehicles, thereby providing the speed and telecommunication architecture necessary for highly personalized and augmented mobile services, new driver-assistance features, and connectivity-enabled innovations. The deal marks VZ’s first agreement with a global premium automaker for 5G-enabled automobiles.
On Feb. 15, 2022, IBM announced that it had acquired Neudesic, a leading U.S. cloud services consultancy that specializes primarily in the Microsoft Azure platform and delivering services in multi-cloud. The acquisition will expand IBM’s hybrid multi-cloud services portfolio and advance its hybrid cloud and AI strategy.
Recent Financial Results
VZ’s revenues for its fiscal year 2021 increased 4.1% year-over-year to $133.61 billion. The company’s adjusted EBITDA increased 2.8% year-over-year to $48.38 billion. Also, its adjusted EPS came in at $1.31, representing an increase of 8.2% year-over-year.
IBM’s revenues for its fiscal fourth quarter ended Dec. 31, 2021, increased 6.5% year-over-year to $16.69 billion. The company’s non-GAAP net income increased 80% year-over-year to $3.03 billion. In addition, its non-GAAP EPS came in at $3.35, up 78.1% year-over-year.
Past and Expected Financial Performance
VZ’s revenue and total assets have grown at CAGRs of 0.7% and 11.5%, respectively, over the past three years. Analysts expect VZ’s revenue to increase 2.1% in the current year and 1.5% next year. The company’s EPS is expected to grow 1.7% in the current year and 2.6% next year. Also, its EPS is expected to grow at 2.8% per annum over the next five years.
In comparison, IBM’s total assets have risen at a 2.3% CAGR over the past three years. However, its revenues declined at a 10.4% CAGR over this period. The company’s revenue is expected to…
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