This article originally appeared on The DIV-Net January 16, 2012.
Linked here is a detailed quantitative analysis of Verizon Communications Inc. (VZ). Below are some highlights from the above linked analysis:
Company Description: Verizon Communications Inc. offers wireline, wireless and broadband services primarily in the northeastern United States. It acquired MCI in 2006 and has since sold or spun off non-core assets. Alltel was acquired in early 2009.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
VZ is trading at a discount to only 3.) above. Since VZ's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 41.1% premium to its calculated fair value of $27.17. VZ did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
VZ earned two Stars in this section for 1.) and 2.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%.