Better Telecom Stock: AT&T vs. Verizon Communications
2026-10-13 13:20
•Robert Izquierdo •The Motley Fool
••• ••••••••••••• Axe Cap view
Verizon Edges AT&T for Income Investors
Verizon’s stronger dividend track record and cash flow make it a more reliable telecom pick than AT&T right now.
South African investors looking toward global telecoms for income should keep a close eye on Verizon rather than AT&T. While AT&T has improved its profitability to a commendable 17.4% net margin and cleaned up its balance sheet by shedding media assets, its 2022 dividend cut still weighs on confidence. Verizon, on the other hand, offers a higher dividend yield of 6.57% and has raised its payments for 20 years in a row. This consistency is backed by $20 billion in free cash flow, which supports its recent fiber and broadband expansion via acquisitions. Yes, Verizon took on more debt, but its forward price-to-earnings ratio at 9.1 makes it cheaper relative to AT&T, which is struggling to convince investors of its growth story. For South African investors, where income payout and currency hedging against rand volatility are crucial, Verizon’s track record holds more water. The risk? Rising US interest rates could challenge telecom valuations globally and impact their overseas revenues when converted back to rand. this is just our opinion and not financial advice
Buy Verizon for income and yield stability, but keep your position size moderate in case rate hikes disrupt telecom sectors. Avoid or trim AT&T until it demonstrates dividend growth and stronger valuation support.
- VZ
- T
- USD/ZAR
- US interest rate hikes affecting telecom valuations
- Rand volatility impacting dollar-based earnings conversions
7/10
AT&T and Verizon are compared as investment options for 2026. AT&T has improved profitability with a 17.4% net margin after divesting media assets, while Verizon has pursued aggressive acquisitions to expand fiber and broadband capabilities. Despite AT&T's higher net margin and lower valuation, the analyst recommends Verizon due to its superior dividend track record (20 consecutive years of increases, 6.57% yield vs. AT&T's 4.94%), stronger free cash flow, and more attractive forward P/E ratio, despite higher debt levels from recent acquisitions.
Our take is based on reporting first published by The Motley Fool.