The Verizon [VZ] share price has remained stubbornly range-bound since the start of the year. The past few months have seen a dip in the stock, but nothing alarming.
Some investors could be wondering what is going to move the Verizon share price higher. Meanwhile, others may be happy to own shares in a solid dividend-paying stock over the long term, especially considering the company looks to be making a concerted effort to cut its carbon footprint.
CEO Hans Vestberg has gone on record about the company’s efforts to cut carbon footprint, saying that climate risk is a business risk. Why has Verizon emerged as a major issuer of green bonds in its quest to go carbon neutral? And what’s the investment case for the business?
What’s happening with the Verizon share price?
The Verizon share price has been trading downwards over the past three months. Down by more than 5% (as of 14 September) and trading just below its 50-day and 200-day moving averages. In comparison, the S&P 500 has seen a near 5% gain in the same period.
For the year so far, it’s safe to say that the Verizon share price has been treading water. The stock opened in 2021 at the $59 a share mark and closed 14 September just above $54 – a level that has acted as a floor for most of the year.
Verizon emerges as a big issuer of green bonds
Verizon has emerged as one of the biggest issuers of green bonds in the US as it moves towards its goal of being net carbon neutral by 2035. The communications giant green bond financing is more than $3bn, according to Market Watch’s Joy Wiltermoth, and there are plans to raise more capital this way.
“Our strategy has been very clear, very straightforward,” Verizon Treasurer Scott Krohn told MarketWatch. “There’s nothing greener than pushing carbon off the grid by adding renewable capacity.”
“To date, we have issued $2bn in green bonds that support the transition to a greener grid and help us achieve our ambitious goal of net-zero emissions in our operations by 2035” - Matt Ellis, Verizon’s executive vice president and chief financial officer
Verizon first issued a green bond in 2019, becoming the first telecommunications provider in the US to do so. This was followed by a second green bond in 2020, which was dedicated to power purchasing agreements for renewable energy projects. These projects account for a gigawatt of new renewable energy generating capacity across seven states, of which 83% is solar energy generating capacity.
“To date, we have issued $2bn in green bonds that support the transition to a greener grid and help us achieve our ambitious goal of net-zero emissions in our operations by 2035,” Matt Ellis, Verizon’s executive vice president and chief financial officer, said in a statement.
Is the Verizon share price a pure income play?
Issuing green bonds is unlikely to impact Verizon’s business but could pay off in terms of corporate stewardship. To complete the financing, Verizon opted to choose Wall Street firms that have a history of advancing diversity in the workplace, with three of the underwriters coming from smaller investment banks, along with heavyweight Morgan Stanley.
In terms of growth, there doesn’t appear to be much of an investment case. Verizon is looking at revenue growth of 5.4% this year, followed by 0.3%, according to Wall Street estimates. Earnings this year are pegged at $5.31 a share, up from $4.9 a share last year. In 2022, earnings are forecast to come in at $5.37 a share, a marginal gain.
“The key is simply keeping those customers from defecting to other providers and redirecting the recurring revenue they generate. And Verizon's very good at keeping those paying customers on board” - James Brumley
However, what Verizon does have going for it is a 4.72% forward dividend yield. The company has consistently paid a dividend since it was Bell Atlantic in 1984 according to The Motley Fool’s James Brumley. Brumley suggests that Verizon’s business model is particularly suited for income-seeking investors as customers typically stick with their mobile phone providers – all Verizon needs to do is keep defections to a minimum.
“The key is simply keeping those customers from defecting to other providers and redirecting the recurring revenue they generate. And Verizon's very good at keeping those paying customers on board. Last quarter, its prepaid wireless churn rate -- the portion of its customers who cancel their service but are replaced by new customers -- was less than 1%, while its postpaid churn rate was only 0.72%,” James Brumley wrote on The Motley Fool.
Among the analysts tracking the stock on Yahoo Finance, the Verizon share price has a $60.23 target, which would see an 11% upside on 14 September close. Of the 32 analysts offering recommendations, 24 rate Verizon a hold, although there are no analysts who rate the stock as underperform or sell.