What the iPhone means for Verizon (NYSE:VZ)
Technology and Telecom are helping the recent rally in stocks. We’ve discussed the tech sector at length in the past, but right now few tech stocks have the cache of Apple (AAPL). If the Nasdaq is up, Apple seems to be touching a new 52-week high. To say the ubiquitous maker of iPods and iPhones is a bellwether stock is an understatement. Apple is big.
The iPhone is one of the most popular mobile phones in the world, but U.S. users are forced to use AT&T (NYSE:T) as their service provider. AT&T has had exclusive rights to the iPhone since the phone made its debut several years ago. This exclusivity has fueled consistent speculation about when AT&T’s chief rival, Verizon (NYSE:VZ), would begin marketing the iPhone.
Rumors that Verizon was about to get its hands on the iPhone have been circulating for years, but nothing has happened. Now it may be more than rumor. Headlines broke on Monday that Apple will be introducing two new iPhones this summer. One will be compatible with the CDMA technology used by Verizon.
The Wall Street Journal reported that Verizon, a Dow component, may begin selling the iPhone as early as September. While the term “game-changer” gets thrown around a lot in Wall Street parlance, the iPhone has the potential to be just that for Verizon. VZ is already the largest mobile phone carrier in the U.S., and many consumers prefer Verizon’s network to AT&T’s. Verizon has a chance to not only switch current customers over to the iPhone, but the company will also be in a position to pilfer legions of AT&T iPhone users.
To be sure, Verizon shares have gotten a nice pop on this news. VZ gained nearly 3% on Tuesday – a big move for a normally-boring stock like Verizon. Even if the iPhone doesn’t make its way to the Verizon network, there are compelling reasons to own the stock. The superior dividend yield of 6.3% certainly makes it attractive. If nothing else, that makes Verizon worth a look for the income part of your portfolio. Don’t forget that Verizon is flush with cash, making dividend increases likely. The company has boosted its payout in each of the last three years.
The bottom line is the iPhone may simply be the icing on Verizon’s cake. That’s great news for shareholders. To go with a potential game-changing move in the cell phone market, buy Verizon (NYSE:VZ).
Brandon Clay
Invest With An Edge
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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
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