Thomas Hughes

Chief Financial Officer of Verizon Communications Inc.

[Thomas Hughes @Sum20VZCFO]

Telecommunications companies carry a high amount of fixed assets and relatively low amounts of inventory. As a result, net working capital for firms can often be negative. Verizon's 0.99 current ratio is average for the industry, and higher than AT&T's 0.76. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon increased its capital expenditure range by $500M for 2020 (now $17.5B to 18.5B) to speed up the transition to 5G. To help fund this, they have begun issuing securities in the Canadian markets for the first time ever. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon's days in inventory as of March 2020 was 11.34 days, meaning Verizon turns over inventory about 32.19 times per year. With such a quick turnover, managing inventory during this pandemic is a big challenge as many of Verizon's stores are closed. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Due to COVID-19, Verizon has announced that it will not charge late fees or terminate service until June 30 for those unable to pay. This was extended from May 13 originally. This will lengthen their operating cycle (typically ~80 days) in the short-term. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon has had 6 stock splits in its history. The most recent split came in 2010 when the company performed a 1000000 for 983989 split. At the time, this caused a slight drop in stock price that quickly rebounded. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

In February of this year, Verizon's board of directors authorized a stock repurchase of 100M shares. Since the corporation has 4.14B shares outstanding, this buyback represents 2.4% of all Verizon stock. This will likely lead to an increase in EPS and price. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon pays dividends quarterly and has paid every quarter since 1984 and increases annually. It is currently $0.6150 per share. Even during this pandemic, Verizon has not decreased dividends. This makes them seem like a good stock to own in a recession @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon took on billions in long-term debt to acquire assets from Vodafone in 2014, and since then their capital structure has consisted of about twice the amount of debt. They have recently increased shareholder's equity, so maybe they plan to change back. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon has a Debt to Equity Ratio of 2.02. This is far above average for a telecommunications company but it has been steadily falling since 2015. Verizon used to be below 1 consistently but appears to have changed its capital structure in recent years. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Stock in telecommunications companies can be a great way to decrease the risk of a portfolio while still getting returns. The average beta among the industry leaders is 0.46 and these companies typically are not heavily affected by recessions (or pandemics). @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon prides itself one having the biggest and best 4G network, but T Mobile has just merged with Sprint to try to surpass them on 5G. Verizon may have to invest heavily to stay ahead of the curve while keeping an eye on keeping 5G investments profitable. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

5G networks are the largest investment in the telecommunications industry at the moment. Verizon believes that the NPV of investing in 5G is now positive. Undoubtedly, they also considered the loss in cash flow of not keeping up with competitors. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon has a beta of 0.44 according to Yahoo Finance, making it a pretty safe investment. Competitor T Mobile has a beta of 0.27 despite being a much younger company. This may be due to T Mobile being owned by a very large german telecommunications company. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

In contrast to Verizon, T Mobile has never paid dividends. This may make them sensitive to a drop in revenue due to the pandemic. T Mobile may end up taking customers from Verizon due to people reducing their spending in a bad economy. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon's dividend yield this year was 4.55% and AT&T's was 6.96%. With investments in 5G and video conferencing alongside COVID, both companies will likely have to retain more earnings and decrease this ratio. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon's stock price has been steadily decreasing during May, while T Mobile's has been rising. This may be due to T Mobile catering to a lower-income audience. Due to the pandemic, more households fit in this category. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Verizon has acquired BlueJeans conferencing company for $500M. They believe that even after COVID-19 subsides, video conferencing will maintain popularity. The market is seeing interest from not only telecommunications companies, but tech companies aswell. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

Ten years ago, Verizon's stock was worth $26.36 per share. Today, the market price is $55.72. That is an average annual increase of about 7.8% per year. Add dividends on top of that, and it has been a good investment. @ProfLowell #Fin2209

[Thomas Hughes @Sum20VZCFO]

@ProfLowell @ProfLowell #Fin2209 At 4% interest, it would take the student about 101 years to get $1.4M by saving $1095 per year. She would have had to start saving 36 years before she was even born. Starting at 20, she would have to save $31.69 a day instead of $3.

[Thomas Hughes @Sum20VZCFO]

@ProfLowell @ProfLowell #Fin2209 If she could save an extra 50 cents per day, she would have $1,735,138.87 at 65, which is about a $250,000 increase. In order to get 12% returns, she would likely need to take on more risk than most retirement accounts do. 5-7% is more realistic.