3 Reasons Verizon Stock Will Likely Continue to Underperform the Market

Core Viewpoint - Verizon Communications is currently underperforming in the market despite being a major player in the U.S. wireless network industry, facing significant challenges that hinder its stock performance [1][12]. Group 1: Financial Challenges - Verizon has high debt levels, with total debt reaching almost $147 billion against a book value of just over $106 billion, largely due to over $18 billion spent on capital expenditures in the past year [3][11]. - A significant contributor to its debt was a $53 billion purchase of wireless spectrum in 2021, which enhances competitive advantage but adds financial strain [4]. - The company generated over $21 billion in free cash flow over the trailing 12 months, which covers its annual dividend costs of more than $11 billion, but this limits funds available for debt repayment [6][7]. Group 2: Dividend Concerns - Verizon's annual dividend payout of $2.76 per share yields 6.6%, significantly higher than the S&P 500 average of 1.1%, yet it raises concerns among investors about potential cuts [7][12]. - The company has increased its dividend for 19 consecutive years, creating an expectation for continued increases, which if not met, could damage investor confidence [8]. Group 3: Growth and Revenue - Verizon reported $102 billion in revenue for the first nine months of 2025, with a year-over-year growth rate of just under 3%, which is considered too modest to attract growth investors [9]. - Despite rising profits, with net income increasing by 18% to $15 billion in the same period, the stock price has declined over the past year, indicating a lack of investor interest [10][11]. Group 4: Market Outlook - The current market conditions suggest that Verizon is likely to continue underperforming due to its heavy debt, intense competition, and slow growth, which dampens its appeal to investors [12]. - A potential long-term strategy for improvement could involve reducing the dividend to pay down debt, although this may negatively impact the stock in the short term [13].