How to Approach Verizon Stock in 2021

VZ reported earnings last week on January 26

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Verizon Communications Inc. (NYSE:VZ) is the second largest phone service provider in the U.S., just behind AT&T (T). The company offers communications, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. Verizon operates 150 locations across the globe and employs 135,000 employees worldwide. In total, the company’s IP network reaches 2,770 cities.

T-Mobile’s (TMUS) merger with Sprint stole headlines and investors’ attention in 2020.  VZ is already down 7.1% in 2021, with its descending 20-day moving average guiding the stock lower. Last week, Verizon released its fourth quarter and full year of 2020 financial results. In the report, VZ highlighted an increase in cash flow, wireless service revenue growth, and the launch of 5G nationwide. But the stock dropped 3.2% post-earnings after reporting fewer-than-expected phone bill subscribers.

VZ Stock Chart

With earnings out of the way, speculative plays on VZ could be done via options amid a volatility crush. The equity's Schaeffer's Volatility Index (SVI) of 39% sits in the low 19th percentile of its annual range. In other words, INTC currently sports attractively priced premiums.

Verizon is looking like a very promising long-term play at the moment. Verizon provides one of the highest dividend yields amongst the mega market cap companies. The company has a forward dividend of $2.51 and a dividend yield of 4.58%. In addition, VZ currently trades at an incredibly attractive price-earnings ratio of 12.73, and its forward price-earnings ratio is estimated to be 11.31. Overall, Verizon stock could present a secure long-term play.

One word of caution for prospective options traders though. Verizon stock currently ranks an incredibly low on the Schaeffer's Volatility Scorecard (SVS), with a score of 19 out of 100. This scorecard is used to identify which underlying stock options have historically had underpriced or overpriced options. Low SVS readings indicate consistently realized lower volatility than its options have priced in -- pointing to VZ  being a potential premium-selling candidate, rather than a premium-buying candidate.

 

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