Verizon Communications stock is lagging the S&P 500, and it’s been so many years since it last beat the market
Verizon Communications (VZ 0.83%) is a big name in telecommunications. It is one of the leading telecommunications providers and also a reliable dividend stock for investors. But one thing it hasn’t usually been: a good growth stock or a market-beating investment. This year, shares are up just 8%, which is a small increase compared to last year. S&P500which has increased by 17% so far in 2024.
Unfortunately, this is normal for Verizon. While the company can occasionally make modest gains, it hasn’t usually performed better than the overall market. But just how poorly it has performed may surprise you.
Verizon stock has outperformed the S&P 500 in only two of the last ten years
Due to a lack of value appreciation, Verizon has been a rather unattractive stock for investors over the past decade. And not only has Verizon consistently underperformed the market, its returns have often been negative. It hasn’t beaten the S&P 500 since 2018, and looking at the stock’s year-to-date returns, it’s likely to underperform the market this year as well.
| Year | Verizon Stock Return | Return of the S&P 500 |
|---|---|---|
| 2023 | -4.3% | 24.2% |
| 2022 | -24.2% | -19.4% |
| 2021 | -11.6% | 26.9% |
| 2020 | -4.3% | 16.3% |
| 2019 | 9.2% | 28.9% |
| 2018 | 6.2% | -6.2% |
| 2017 | -0.8% | 19.4% |
| 2016 | 15.5% | 9.5% |
| 2015 | -1.2% | -0.7% |
| 2014 | -4.8% | 11.4% |
Source: YCharts.
Only once has Verizon even posted a double-digit profit despite its lackluster results. One might have expected a big rebound after a particularly bad year, but that hasn’t happened at Verizon, at least not yet. The company has recovered this year, but it hasn’t been able to make up for the fairly large losses it has suffered since 2020.
Is Verizon stock set for a big year in 2025?
It may be tempting to look at Verizon’s recent results and write off the stock as a bad buy heading into next year. But the past is not a guide to the future. And there are potential catalysts that could drive the stock higher next year. The most obvious of these is interest rate cuts.
Verizon stock currently yields 6.5 percent, which is much higher than the usual average.
VZ dividend yield data from YCharts.
While tempting, investors have not flocked to high-dividend stocks because in a high-yield environment, there are other asset classes that offer decent returns (such as bonds) without the added risk that comes with equity investing. However, once interest rates start to fall, that equation could change.
One could argue that the stock has underperformed in recent years due to high interest rates. If that argument holds, Verizon could be one of the most sought-after stocks once interest rates start coming back down. That could happen as soon as next month when the Federal Reserve considers cutting rates.
VZ data from YCharts.
Verizon is also more than just a speculative asset. The company has generated strong operating profits of at least $28 billion in each of the last four years. In the last two years, it has amassed free cash flow of over $23 billion. With a forward price-earnings ratio of just nine, the stock is also trading at a significant discount.
Should you buy Verizon stock now?
Verizon stock hasn’t performed well in recent years, but that doesn’t mean it isn’t long overdue for a big rally. Given its solid results and attractive valuation, this could be an undervalued stock to buy next year. With investors looking for safer stocks as interest rates fall and recession fears rise, Verizon could become a much more desirable stock in the near future. The high yield gives investors plenty of incentive to remain patient with the stock.
