Verizon to Buy Frontier Communications, Hikes Dividend
Verizon's purchase of Frontier will significantly expand its fiber footprint across the United States. Here's what you need to know.
Verizon Communications (VZ) confirmed Thursday that it will be buying Frontier Communications Parent (FYBR) in an all-cash transaction valuing it at approximately $20 billion.
VZ stock is trading slightly lower Thursday while FYBR shares are down more than 9% at last check, paring a portion of Wednesday's big gains that were sparked by buzz about a potential Verizon buyout.
Under the terms of the agreement, Frontier shareholders will receive $38.50 per share in cash for every share they own, a slight discount to the stock's September 4 close at $38.68.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"The acquisition of Frontier is a strategic fit," said Verizon CEO Hans Vestberg in a statement. "It will build on Verizon's two decades of leadership at the forefront of fiber and is an opportunity to become more competitive in more markets throughout the United States, enhancing our ability to deliver premium offerings to millions more customers across a combined fiber network."
Verizon said the transaction will be accretive to its revenue and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) growth rates upon closing and drive at least $500 million in run-rate cost synergies by year three. The telecommunications giant added that it will maintain its strong balance sheet and liquidity profile upon closing.
The deal is subject to approval by Frontier shareholders, regulatory clearance and other closing conditions, Verizon said. If all goes as planned, the transaction is expected to close in approximately 18 months.
In the press release announcing the acquisition, Verizon also reaffirmed its full-year guidance for 2024. It continues to anticipate total wireless service revenue growth in the range of 2% to 3.5% and earnings in the range of $4.50 to $4.70 per share, amongst other factors.
Verizon announces another dividend hike
In a separate statement, Verizon announced a 1.9% increase to its quarterly dividend Wednesday. The company will now pay a quarterly dividend of 67.75 cents per share, which equates to an annualized dividend of $2.71 per share. The next dividend is payable on November 1 to shareholders of record at the close of business on October 10.
Verizon proudly noted that this marked the 18th consecutive year in which it has approved a quarterly dividend increase.
Companies that regularly hike their dividends are often seen as solid additions to long-term investment portfolios. "That's partly because regular dividend increases lift the yield on an investor's original cost basis. Stick around long enough, and the modest yield you received on your initial investment can hit double digits one day," writes Dan Burrows, senior investing writer at Kiplinger.com, in his feature "Best Dividend Stocks to Buy for Dependable Dividend Growth."
Is Verizon stock a buy, sell or hold?
Verizon Communications has slightly lagged the broad market this year, up nearly 16% on a total return basis (price change plus dividends) vs the S&P 500's roughly 17% gain. Still, analysts are upbeat toward the Dow Jones stock.
According to S&P Global Market Intelligence, the average analyst target price for VZ stock is $46.36, representing implied upside of more than 12% to current levels. Meanwhile, the consensus recommendation is a Buy.
Financial services firm Oppenheimer has an Outperform rating (equivalent to a Buy) and $48 price target on VZ stock.
"Verizon is benefiting from the explosion in the popularity of smartphones and mobile data usage growth of 30%-plus per year with a high quality network due to consistently high capital expenditures spending," said Oppenheimer analyst Timothy Horan in a July 22 note. "The company has done a good job of divesting non-core assets in order to focus on wireless, enterprise, FiOS (its fiber voice/video/data offering) in its wireline segment, fixed wireless, and now value-added services/content."
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Should You Get a Long-Term or Short-Term CD Before the Next Fed Meeting?
Is a long-term or short-term CD better to open before the Fed's next meeting? Here's what you need to know.
By Erin Bendig Published
-
This Double-Dip Trust Benefit Really Is Too Good to Be True
Let's clear up the confusion among some trust makers and taxpayers over how grantor trust status affects the step-up in basis and estate tax exclusion.
By Rustin Diehl, JD, LLM Published
-
This Double-Dip Trust Benefit Really Is Too Good to Be True
Let's clear up the confusion among some trust makers and taxpayers over how grantor trust status affects the step-up in basis and estate tax exclusion.
By Rustin Diehl, JD, LLM Published
-
How to Structure Retirement Income to Tamp Down Taxes
From Social Security to IRAs and investments, with smart tax planning, retirees can have some control over how much of their income they'll get to keep.
By Rick Barnett, CEPP, CFCA, MEP Published
-
5 Stocks to Buy for a Harris Presidency
The race for the White House is heating up and these five stocks are set to benefit if Kamala Harris claims victory.
By Will Ashworth Published
-
Four Key Elements of a Good Estate Plan
An estate plan can be complex or simple, depending on your estate and your wishes, but every estate plan should accomplish these basic goals.
By John Goralka Published
-
Stock Market Today: Stocks Rise as Fed Rate Cuts Near
The main indexes closed out the day and week notably higher as excitement swirls ahead of next week's rate cut.
By Karee Venema Published
-
Four Common Misconceptions About Life Insurance
Just because you have no dependents and no debt doesn't mean life insurance wouldn't come in exceedingly handy for someone in your life or even a charity.
By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS Published
-
Should You Keep Your 401(k) When You Retire?
Here are three primary reasons you might want to consider moving your retirement money from your 401(k) to an IRA once you retire.
By Joe F. Schmitz Jr., CFP®, ChFC® Published
-
Want to Move to Italy? What to Consider Financially
Once you've decided that you and Italy are compatible, you'll want to work out your tax planning, investments, retirement accounts and benefits.
By Alex Ingrim, Chartered MCSI Published