Core Viewpoint - Verizon Communications is viewed as a reliable defensive stock but has struggled to outperform the market, particularly during bull markets [1][2][12] Group 1: Performance and Market Comparison - Since the current bull market began on October 12, 2022, the S&P 500 has risen by 51%, while Verizon's stock has only increased by 28% [2] - In 2023, Verizon's stock rallied by 14% as the S&P 500 declined by 8%, indicating its defensive nature during economic uncertainty [2] - Over the past 20 years, Verizon's stock has only risen by 34%, with a $10,000 investment growing to $13,400, compared to an S&P 500 index fund that would have grown to approximately $43,140 [3][4] Group 2: Financial Metrics and Debt - Verizon's adjusted earnings per share (EPS) has had a compound annual growth rate (CAGR) of only 3% from 2004 to 2024 [4] - The company's year-end debt increased from $39.3 billion to $168.4 billion, primarily due to a $130 billion acquisition of Vodafone's stake in Verizon Wireless in 2014 [5] - Verizon expects its wireless revenue to grow by 2% to 2.8% in 2025, with adjusted EBITDA projected to grow by 1% to 3% [8] Group 3: Subscriber Growth and Market Strategy - In 2023, Verizon struggled to gain new wireless subscribers, attributing the slowdown to competition from AT&T, T-Mobile, and other smaller players [6] - In 2024, Verizon doubled its postpaid phone net additions, thanks to localized incentives, marketing campaigns, and a partnership with Walmart [7] - The wireless retail churn rate improved from 1.67% in 2023 to 1.62% in 2024, indicating better customer retention [7] Group 4: Future Outlook - Verizon's enterprise value is $329 billion, trading at 7 times this year's adjusted EBITDA, with a forward dividend yield of 6.1% [9] - If Verizon maintains a CAGR of 3% for adjusted EPS and EBITDA over the next 20 years, its stock could potentially rise by more than 90% to around $88 per share by 2045 [11] - Despite potential gains, Verizon is expected to underperform compared to the S&P 500, which has delivered an average annual return of over 10% since 1957 [11][12]

Core Viewpoint - In a market characterized by high valuations, Verizon, IBM, and Cisco are identified as attractive income-generating investments due to their lower valuations and healthy dividend yields [1][2]. Group 1: Verizon - Verizon's stock reached a 13-year low of $28.25 on October 13, 2023, but has since rebounded to nearly $44 [3]. - The company doubled its annual postpaid phone net additions in 2024, driven by localized marketing, customizable plans, and growth in its distribution business with Walmart [4]. - Verizon's free cash flow rose 6% to $19.8 billion, covering its $11.2 billion in dividend payments, with a forward yield of 6.3% and a low forward price-to-earnings ratio of 9 [5]. Group 2: IBM - Under CEO Arvind Krishna, IBM has shifted focus towards cloud-based services and AI, spinning off its slow-growth IT infrastructure services business [6][7]. - From 2020 to 2024, IBM's revenue and EPS grew at compound annual growth rates of 3% and 1%, respectively, marking a recovery after years of decline [8]. - Analysts project a 4% growth in revenue and EPS for IBM this year, with a forward dividend yield of 2.7% and a payout ratio of 52% of its free cash flow [9]. Group 3: Cisco - Cisco faced challenges in fiscal 2021 and 2022 due to supply chain constraints but saw growth in fiscal 2023 as these issues were resolved [10][11]. - Analysts expect Cisco's revenue to rise 5% in fiscal 2025 as inventory issues are addressed, although adjusted EPS may remain flat due to integration costs from its acquisition of Splunk [12]. - Cisco's stock is valued at 17 times forward earnings, with a forward dividend yield of 2.6%, and it spent only half of its free cash flow on dividends over the past year [13].