Investors are shifting their strategies due to rising market uncertainty caused by ongoing tariff disputes and widespread economic concerns. They are seeking safety in historically defensive sectors, and as a result, the telecommunications sector is experiencing a resurgence of interest. The double-digit growth of telecom giants Verizon (NYSE: VZ) and AT&T (NYSE: T) over the past three months highlights the renewed attention on these companies.
These established telecom titans may be emerging as crucial defensive anchors for portfolios navigating the complexities of the current economic climate. The search for stability and reliable yield appears to put these familiar names in the spotlight.
Why the Telcom Sector Shines in Stormy Weather
The telecommunications sector is traditionally seen as a defensive investment, particularly appealing during economic downturns or market instability. This is due to the essential nature of telecommunication services; demand for connectivity remains relatively stable even during economic contractions, ensuring consistent revenue streams for major carriers, often based on recurring monthly subscriptions.
Established telecommunication companies like Verizon and AT&T also offer appealing dividend yields. These companies provide a reliable income stream and a buffer against share price declines when market appreciation is uncertain. This combination of stable revenue and consistent dividends reinforces the sector's attractiveness as a haven during economic turbulence, explaining the historical trend of capital flowing toward telecommunications during periods of market anxiety.
Verizon: Connecting With Confidence
[content-module:DividendStats|NYSE: VZ]Verizon Communications recently provided tangible evidence supporting its defensive credentials, delivering strong operational and financial results for the fourth quarter and full year of 2024. The company successfully met its 2024 financial guidance and reiterated a positive outlook for 2025.
Fourth-quarter 2024 total operating revenue climbed 1.6 percent year-over-year to $35.7 billion, contributing to a full-year revenue figure of $134.8 billion. Growth was notably driven by wireless service revenue, which reached $20.0 billion in the fourth quarter, marking 18 consecutive quarters of sequential growth, fueled by pricing actions and the expansion of fixed wireless access (FWA).
Verizon added nearly 1 million postpaid mobile and broadband subscribers in the fourth quarter, including 568,000 postpaid phone net additions and 373,000 FWA net additions, bringing its FWA subscriber base to nearly 4.6 million. Reinforcing its commitment to shareholders, Verizon declared a quarterly dividend of 67.75 cents per share, highlighting its track record of 18 consecutive years of dividend increases and a current yield of around 6.02%.
The company also announced plans to redeem approximately $984.8 million of its 2.625% Notes due 2026, further managing its debt profile. Verizon’s analyst community sentiment reflects cautious optimism, with a moderate buy consensus rating and an average price target suggesting modest upside potential.
AT&T: Reconnecting Value
[content-module:DividendStats|NYSE: T]AT&T exceeded Q4 2024 earnings per share (EPS) estimates with an adjusted EPS of $0.54 compared to consensus estimates of $0.48. The company reported healthy subscriber growth, adding 1.7 million postpaid phone net additions and over 1 million AT&T Fiber subscribers. The company is framing a narrative around transformation and focused growth to reinforce its position as a compelling defensive investment.
Despite a slight year-over-year decrease in full-year 2024 revenue to $122.3 billion, CEO John Stankey highlighted the company's strategic focus on expanding its 5G and fiber networks as essential for long-term value and returns. Through cost-saving initiatives, AT&T also aims to achieve over $3 billion in run-rate savings by the end of 2027 and plans to start share repurchases in the second half of 2025 as it nears its net debt-to-adjusted EBITDA target.
AT&T’s dividend yield of approximately 3.94%, while lower than Verizon's, has a sustainable payout ratio. Recent stock performance has been positive, reaching new 52-week highs, and several analysts have upgraded the stock or raised price targets, leading to a moderate buy consensus rating and indicating increasing market confidence in AT&T's strategic direction and financial outlook.
Choosing Your Connection
Verizon and AT&T exhibit distinct characteristics when evaluated as defensive stocks. Verizon's dividend yield of approximately 6.02% surpasses AT&T's 3.94%, attracting income-focused investors, especially considering Verizon's consistent dividend growth history compared to AT&T's recent dividend reductions.
Verizon also appears more attractively valued with a lower P/E ratio of 10.87 based on trailing earnings compared to AT&T's 18.92. While AT&T's projected earnings growth of 6.07% exceeds Verizon's 3.62%, both companies carry substantial debt, typical of the telecom sector, with comparable debt-to-equity ratios (AT&T at 1.00, Verizon at 1.21). Financially, Verizon outperformed AT&T in 2024 with higher annual revenue ($134.8B vs. $122.3B) and net income ($17.5B vs. $11.0B).
Both stocks hold a moderate buy consensus rating, but average price targets suggest potential upside for Verizon, while AT&T's target is slightly below current levels, reflecting its recent positive performance.
Telecom's Enduring Signal
Verizon and AT&T's stock performance and heightened investor interest signal a potential resurgence of traditional defensive telecom stocks during a time of market uncertainty and economic headwinds. Both companies have displayed operational strength, with Verizon demonstrating consistent growth and shareholder returns and AT&T focusing on its core connectivity assets.
Their healthy dividend yields are particularly appealing in a volatile or yield-scarce market.
However, it is important to consider the sector's significant debt levels, competitive pressures, and regulatory landscape. While not wholly immune to market risks, the essential nature of their services offers some protection during turbulent times.
For investors seeking to strengthen their portfolio's defensive stance, Verizon and AT&T may serve as reliable anchors, providing relative stability and income generation in an increasingly uncertain market. They could be the market's "unlikely heroes" for those prioritizing capital preservation and yield.
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