Better Telecom Stock: T-Mobile US vs. Verizon Communications

Market Overview - The wireless communications industry in America is dominated by three major players: AT&T, Verizon Communications, and T-Mobile US, which control virtually the entire market [1] - T-Mobile stock has significantly outperformed its competitors over the past decade, offering valuable lessons on long-term investing [1] Financial Comparison - Verizon generates over $37 billion in cash profits annually, more than twice as much as T-Mobile [2] - Verizon spends $11 billion on dividends, representing almost all of its net income, leaving less for network investment [2] - Verizon has $150 billion in long-term debt, with a debt-to-EBITDA ratio of 3.7, limiting financial flexibility [3] - T-Mobile spends only 37% of its net income on dividends and has a lower debt-to-EBITDA ratio of 2.7, allowing more investment in its network [3] Business Momentum - T-Mobile has consistently offered the fastest 5G upload and download speeds in the US, according to Opensignal [4] - T-Mobile added a net of 3.1 million new postpaid wireless phone customers in 2023, while Verizon lost 132,000 [4] Growth Prospects - Verizon is expected to grow earnings by just 1% to 2% annually, compared to over 20% for T-Mobile [6] - T-Mobile's strong customer growth and lighter financial burden position it for robust earnings expansion [6] Valuation - Verizon trades at a forward P/E of 8 with a 6.7% dividend yield, while T-Mobile trades at a forward P/E of 17 with a 0.4% yield [5] - Despite Verizon's low valuation and high dividend, T-Mobile has easily outperformed in stock performance due to its organic growth [5]