Uber's South Asia policy chief quits in latest senior departure

NEW DELHI (Reuters) – Uber’s [UBER.UL] chief of policy for India and South Asia has quit, two sources familiar with the matter said on Monday, in the latest high-level departure at the online taxi company.

The Uber logo is seen on mobile telephone in London, Britain, September 25, 2017. REUTERS/Hannah McKay

Shweta Rajpal Kohli, a former Indian journalist who joined Uber last year, would join cloud-based software maker Salesforce.com Inc next month, the sources told Reuters.

Uber, in a statement to Reuters on Tuesday, confirmed Kohli had quit.

Kohli was mostly tasked with building Uber’s relations with regulators and government officials in India, a market where the firm has faced several regulatory and reputational hurdles.

One source said Kohli “was leading government engagements in the influential circles, so her exit is a step back for Uber.”

Uber was briefly banned in New Delhi after one of its drivers raped a woman passenger in 2014.

Uber hired a law firm this year to investigate how the firm managed to obtain the medical records of the rape victim, an incident that led to criticism of the culture at the U.S. firm, sources told Reuters in June. Uber declined to comment.

Kohli is the latest senior executive to leave Uber. The firm’s European policy chief quit in October, shortly after the departure of Uber’s top boss in Britain.

Uber has suffered a tumultuous few months which has seen former CEO and co-founder Travis Kalanick forced out after a series of boardroom controversies and other regulatory battles in multiple U.S. states and around the world.

Uber counts India as its second-biggest market after the United States. It operates in about 30 Indian cities and competes with Ola, a ride hailing service backed by Japan’s Softbank.

Uber said on Monday it had agreed with a consortium led by SoftBank and Dragoneer Investment Group on a potential investment.

Editing by Euan Rochaa and Edmund Blair

Our Standards:The Thomson Reuters Trust Principles.

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Valeant Surges Post-Q3: A Reassessment

Why Valeant may have been treading water for months

As a bear on Seeking Alpha about Valeant (VRX) since October 2015, when the stock was around $100, I modified my views some months ago subsequent to the stock falling below $10, after which several positives emerged. These positives included:

  • Removal of the Ackman overhang,
  • pending or actual launch of Siliq,
  • expectations that Vyzulta would finally launch, and
  • rescheduling of the debt.

The modified trading views were to expect VRX to trade in a range rather than collapse immediately. After all, a 95% bear market since the Q3 2015 highs is plenty. Furthermore, the psychology of speculators gets very interesting when a stock with about a $5 B market cap has $25 B of net debt. In this situation, the enterprise value may be viewed as the $5 B value of shares outstanding X price, plus $25 B or $30 B. This is the amount the company needs to earn to pay back the debt and earn the value of the stated market cap. Thus, if the company can earn not just $30 B but $35 B, subtracting the same $25 B debt means that the equity is suddenly worth $10 B. This implies that the stock price doubles. From there, one can imagine an “up, up and away” move as Bausch & Lomb strengthens and new products succeed, one after the other. Meanwhile, interest costs decline as debt gets paid down, etc. So then one can think of a triple to, say, $40. All this upside, and the worst is that the stock can go to zero – but the usual speculator psychology is that one can limit one’s loss by selling at some predetermined point, such as $10.

Thus there is a pool of buying power that likes the reward:risk ratio. At the same time, there is a large pool of stockholders that is down on the stock and is perhaps grimly determined to wait for better times.

So the combination of the company offering hope from new products and receiving breathing space from its creditors led me to think of a range-bound stock price, but within a bearish big picture setting where I believed and said the major trend for the stock was probably still down, possibly to or near zero.

However, with VRX having rallied post-earnings to close the week at $15.38, this article explains why the earnings release, slide presentation, and conference call continue to support a bearish long term view

A personal note: I’ve never been long or short VRX, and am a long-only investor. I am not working with or in any other way aligned with a short seller, put buyer, etc.

As far as analysis of companies that have lots of debt and little cash, and which emphasize non-GAAP “earnings,” I look at them two ways to see if they correlate. If they point in the same direction, both bearish, then I can think about them bearishly and explain it both ways in an article. The two ways that cover the bases with VRX are GAAP EPS and balance sheet/cash flow analysis. It is the latter that allows me to join the bulls and ignore amortization charges, goodwill writedowns, etc. But because stock prices basically rise with earnings, I will begin first with earnings and ask if the core of VRX is, or is not, profitable, using generally accepted accounting principles that prevail in the United States of America.

Another complicated quarter for VRX, but at the core, VRX is unprofitable (and this may worsen)

As VRX’s CFO explained in his prepared remarks in the conference call, VRX showed a GAAP profit due to a very large tax benefit. There were also significant one-time events, which I will try to exclude. I will just try to get to a recurring core of the P&L. Thus I am excluding negatives that some other perma-bears on VRX mention, such as writedowns goodwill/intangibles/in-process R&D, and legal risk (I have never worried much about legal risk for VRX, though the legal fees are significant). I do this to try to accurately uncover the true story.

Now to my P&L analysis.

From the first table in the earnings release, we learn of $2.2 B in revenues for Q3. Here are the expenses I list as reasonably recurring, in millions of USD:

  • 659 = cost of goods and revenues
  • 623 = SG&A
  • 81 = R&D
  • 657 = amortization of intangibles
  • 456 = net interest expense.

Total recurring expenses: $2.48 B.

Loss from continuing operations, excluding tax expenses or benefits, about $300 MM.

So, VRX is unprofitable even after excluding writedowns and the like, and excluding one-time tax benefits.

The next question is whether this will change in future years. Only time will tell, of course. I discuss this later and explain why I have a point of view that is negative for VRX’s chances.

Why amortization charges are included in measuring profitability (or, “a false construct”)

Some VRX bulls dispute amortization as a continuing cost when doing a profit and loss analysis. I disagree: it is a real cost when doing P&L analysis. In addition, unlike writedowns, amortization charges are recurring; they end on schedule, or when changing conditions change or eliminate the amortization charges. All the amortization does is measure money previously spent that never entered the P&L as the loss that it was. This accounting convention was done to benefit shareholders. Then it got misused by aggressive managements and their allies/enablers in the financial community. The reasoning in a little more detail:

A purchase costs money, with the operative word being “costs.” That cost has to either be put in the P&L line when the money is spent (cash basis) or spread out over time (amortized). This basic insight led me to correctly diagnose VRX going back to my first article, written when VRX was around $100:

Basic Problems With Valeant’s Valuation, With Comments On Recent News

One of the overlooked aspects of the stock is a conventional analysis of its operations based on generally accepted accounting principles…

The conclusion is that VRX was grossly overpriced simply based on GAAP EPS and a very weak balance sheet.

That article also correctly estimated that VRX was probably worth $10 per share or less (at least a 90% haircut) even if the allegations then hitting the news from short sellers such as Andrew Left were false.

This helps to show the value of paying attention to GAAP profits or losses. The media was propounding the idea that VRX was highly profitable (even the previously conservative Value Line joined in), but that was using fake non-GAAP “earnings.” These numbers omitted such key points as bringing the cost of the acquisitions into the ongoing P&L statements via amortization charges. There were other evasions in the non-GAAP numbers, but ignoring amortization was the largest. Because VRX’s tens of billions of dollars expended on acquisition was funded entirely, or almost entirely, with debt, the importance of thinking through underlying profitability was much more important than with a company that spent its own cash in the bank on a deal. In that case, GAAP continues to be the right way to measure whether the deal is working out, but the company’s solvency is not at stake as it is when the deals bring in mounds and mounds of debt.

As it happened, within mere months of my article, VRX was on the brink of having to default on its debt, which I think would probably have destroyed the share price, until lenders saved it. Undoubtedly saving it was to benefit the lenders, not shareholders, and this led to the lenders coming into control of the company’s goals. Debt repayment rather than growth and gambling suddenly took priority.

The theme of the importance of GAAP was just then coming into public consciousness. About a week after my article was published, the New York Times achieved much greater awareness of the same issue I was pointing to in a Sunday article by the well-known realist on financial affairs, Gretchen Morgenson. The title of her piece was clear: Valeant Shows the Perils of Fantasy Numbers. Two paragraphs from her article show the validity of our arguments:

Valeant is among a growing number of companies that regularly present two types of financial results: those that adhere to generally accepted accounting principles, and those that help executives put the best spin on their operations.

In accounting parlance, such adjusted figures — which exclude certain costs from calculations of a company’s earnings — are known as pro forma or non-GAAP numbers. But let’s call them what they really are: a false construct.

In case you still disagree, just look at all the pharma roll-ups that have emphasized non-GAAP numbers always trying to get investors to ignore those pesky amortization charges. These worthies include Teva (TEVA), Mallinckrodt (MNK), Endo (ENDP), etc. All of them are huge losers in one of America’s great bull markets. Even Allergan (AGN), a stronger contender, has done as well as it has done only because it made a huge capital gain by dumping its large rolled-up generic division (Actavis) to TEVA. But as I have pointed out in my AGN articles, I have always resolutely refused to turn fundamentally bullish on AGN even when the stock was down, because using GAAP, profitability remained absent despite the stronger assets and strong management.

Moving on, the next section discusses a cash flow method, not the P&L method, of looking at VRX. This is the proper way to ignore amortization charges.

This method allows us to think about whether VRX is ultimately solvent based on free cash flows: is it generating more than enough cash to meet its ongoing interest and, beginning in 2020, its debt repayment obligations? What are the trends for cash flow from operations going forward?

Cash flow is not good enough now, and it looks worse for next year

The trend in cash flows this year is poor, mostly but not exclusively reflecting ongoing problems in VRX’s dermatology division, the sale of FCF-positive assets, and ongoing losses of exclusivity. From the CFO’s prepared remarks (see Slide 16):

We generated $490 million of cash from operations in the quarter, and year to date we generated more than $1.7 billion.

This sentence calls for analysis. Cash flow from operations, or CFFO, for nine months was $1.71 B. Subtract $0.49 B for Q3’s contribution and you see that H1 had CFFO of $1.22 B, which is $0.61 B on average per quarter. Thus:

CFFO in Q3 saw a drop of about 20% from the H1 average.

How is that a justification for this debt-ridden company’s stock to have surged? Just because, just maybe, the bear market in generic pricing is winding down (no guarantees)? VRX has only a small generic division, which has low profitability. VRX is a combination of B&L and specialty branded pharma, with a small generic business as well.

Now let’s look at the debt set-up to see if likely forward CFFO run rates are adequate to meet the upcoming obligations. I think this shows that there is no reason for any fundamentally-based investor to go long this stock anywhere near the current price.

VRX’s debt maturity schedule requires huge cash flows

As shown on slide 16 of the presentation linked to above, VRX must repay about $20 B by 2023 to meet its debt obligations. Clearly, $2 B per year X 6 years is only $12 B, so it’s $8 B short by that quick calculation. (Perhaps $20 B shrank to $19 B or so after the quarter ended, due to debt repayments the company made, so maybe it would be $7 B short using this simple calculation).

This multi-billion-dollar shortfall is much more than VRX’s entire market cap, so good luck getting the money from the sale of equity.

But it looks worse than that to yours truly just looking forward to next year.

There are at least two ongoing problems with attaining that number, discussed next.

Ongoing losses of exclusivity (slides 31-32)

From Slide 32, we see that two ophtho drugs, Lotemax and Istalol, are anticipated both to go generic this quarter. Their estimated 2017 sales apparently will be around $111 MM. Critically, the pre-tax profit from these sales is $106 MM (Not all sales are equal. B&L has much lower gross margins than these old cash cows).

That point is important in assessing VRX. Old drugs getting near end of life lose marketing support and thus represent almost pure profit. Whereas, new drugs are expensive to introduce to the market and tend to be cash flow negative for some time.

Two other drugs, Mephyton and Syprine, likely both lose exclusivity in Q4. Finally, Isuprel has lost exclusivity in Q3, and unless that occurred early in July, the full impact of that was not seen in CFFO last quarter.

The 2016 Annual Report shows that Mephyton and Syprine together achieved $144 MM in sales. Isuprel did $188 MM in 2016 sales. Per slide 40, Mephyton and Syprine together had $32 MM in Q3 sales. I assume that translated to around $120 MM annualized in FCF for these two brands. Isuprel did $30 MM in Q3 2016, $30 MM in Q2 2017, and $23 MM in Q3 2017.

The five drugs discussed above may cost VRX $300 MM annualized as soon as next year, according to my calculations.

Thus CFFO at VRX has a serious structural problem: it looks ready to get worse.

Also, based on p. 148 of the annual report which shows the decline in annual amortization for several years hence, significant additional losses of exclusivity are likely in 2018 and beyond. As one example, Apriso, with sales annualizing around $160 MM, may go generic in April next year. Others, possibly a relatively major product called Uceris, are anticipated to go generic in the next several years. Again, many of these are not being promoted much, so that their pre-tax profit margins can easily exceed 90%. Thus if their sales drop to near-zero, the hit to profits is proportionally greater than the sales that remain, which generally have much lower all-in pre-tax margins.

All this creates continuing headwinds. In addition…

Recent divestitures hurt CFFO

Per slide 33, the sale of iNova at the end of Q3 did not materially affect cash flow, but beginning this quarter, its annualized $100 MM EBITDA will be gone. Then, this quarter, Obagi, with EBITDA around $20 MM will have flown out the door.

The divestiture of two divisions alone will cost around $120 MM in FCCO next year.

Thus…

Putting things together, VRX looks to me to likely run about $400 MM less in CFFO annualized next year versus this. So, instead of CFFO annualizing at $2 B per year, I propose $1.6 B. Multiply that by the six years from 2018 to 2023, inclusive, and you get $9.6 B in cumulative CFFO.

This is inadequate compared to $19-20 B in debt maturities by 2023. I doubt that anything that VRX is launching, or anything arising from its shrunken pipeline, can make up the approximate $9 B gap.

In addition, remember the $5-6 B in long-term debt due after 2023. Even if Xifaxan retains patent protection for a long time, eventually it too will go generic.

So, the cash flow method of looking at VRX makes it mandatory for massive profits and free cash flows to be generated from new products, plus hoped-for growth of Xifaxan and other products such as Relistor, and from B&L. Everybody is, of course, free to be as optimistic as they want on the above. To keep this article from becoming a whale, I will focus on three new or expected products, where perhaps the Street does not have as clear a view of what they may achieve than for the known quantities of Xifaxan et al and B&L.

Brief analysis Of Siliq, Vyzulta and IDP-118

Siliq

Sales were nominal in Q3. Competition is fierce in psoriasis. Even the leading oral entry, Otezla from Celgene (CELG) faced both pricing and volume pressure in Q3. Siliq is thus a “show me” story, because of its black box warning and because of newer, also highly effective antibodies that lack that black box warning. Also, the innovator, AstraZeneca (AZN), is VRX’s partner, splitting profits, if any, and also in line for another lump sum payout if sales reach a certain level. Right now and perhaps permanently, Siliq uses cash.

It is difficult for me to be optimistic about Siliq’s cash generation ability for VRX knowing that before Siliq is prescribed, patients must be advised that this drug may make them suddenly want to kill themselves. The black box warning may be removed at some point, but A) the clock is ticking and B) competition is tough and growing in the psoriasis space. So I am very cautious about Siliq.

Vyzulta

This is an eyedrop for glaucoma. The active ingredient is related to the heavily genericized glaucoma drug Xalatan, the dominant force in the market. The leading brand of this type of glaucoma treated is Travatan Z, is an improved formulation of Travatan. The active ingredient is the same in both Travatan and Travatan Z, but the latter is easier on the eyes.

Travatan Z’s marketer is Alcon, the powerful eye care division of the giant Novartis (NVS).

Comparing the Vyzulta P.I. to the P.I. of Travatan Z, similar levels of therapeutic effect were demonstrated, even though the VRX drug, Vyzulta, may work by two mechanisms within the eye whereas Travatan Z may work by one mechanism. The P.I. of Travatan Z also mentions results of its effects as monotherapy as well as its use as add-on therapy to a beta-blocker eye drop. However, the following is the entirety of the clinical results listed for Vyzulta:

14 CLINICAL STUDIES

In clinical studies up to 12 months duration, patients with open-angle glaucoma or ocular hypertension with average baseline intraocular pressures (IOPs) of 26.7 mmHg, the IOP-lowering effect of VYZULTA™ (latanoprostene bunod ophthalmic solution) 0.024% once daily (in the evening) was up to 7 to 9 mmHg.

This FDA-approved language stands in contrast to all the studies listed in VRX’s press release announcing FDA approval of Vyzulta, which mention other clinical trials results. These may have been Phase 2 results that the FDA did not consider scientifically strong enough to allow mention of them in the label.

There is also competition in the branded space from Lumigan, an Allergan (AGN) product; AGN is also very strong in ophtho.

So, this again is a “show me” story. The incumbent brands will fight hard for every percentage point of market share (and fractions of points). They may be able to bundle products, and they will likely do what it takes on price as well to withstand Vyzulta. For VRX to make a lot of profit from this eyedrop is not going to be easy, in my humble opinion.

IDP-118

This pipeline candidate is a combination of two generic topical agents for psoriasis. An NDA was submitted in September. Assuming FDA approval, which I expect next year, there are obvious problems with the prospects for this. Psoriasis topicals comprise a crowded field with numerous generics. The two drugs in IDP-118 are each available generically. In the press release linked to above, VRX makes this statement on that topic:

Both [drugs] approved to treat plaque psoriasis, halobetasol propionate and tazarotene, when used separately, are limited to a four-week or less duration of use. Based on existing data from clinical studies, the combination of these ingredients in IDP-118 with a dual mechanism of action, potentially allows for expanded duration of use, with reduced adverse events.

The first point within this first problem is that four weeks of treatment are often enough.

A second problem is that once the combination is approved for a longer period, then it may be logical for the doctor to try each drug individually, and if treatment needs to go longer than four weeks, continue them individually.

The basic question on sales is why insurers will not create major financial incentives for each drug to be dispensed individually if a prescription for the combo is written.

In the linked press release, VRX references a Phase 2 study that it says shows that IDP-118 was superior to each drug given separately. Let us see if that sort of language is included in the P.I. I am skeptical at this point of this.

Finally, there are the twin questions of what intellectual property VRX will have to protect this combination, and the related question that if this idea is so good, and VRX has been talking about it for some time, how much similar competition from other combinations will also come to market?

Putting it together, I look at IDP-118 the way I look at Siliq and Vyzulta, namely a “show me” product with uncertain commercial prospects.

Other products

VRX does have some other projects, including several “IDP-” type dermatologics. It is implausible in my view that all of them collectively will move the needle given the massive scale of VRX’s net debt load. VRX spends about 4% of revenues on R&D, which is on the downswing. With no platform technology or discovery engine, structurally VRX is not much of a drug company in my eyes. Rather, it is primarily a bunch of old brands, in-licensed products such as Siliq, and B&L.

Upside potential

Since I have disclosed no confidential information in writing this article, the information I have analyzed can be known by all. So, whether for technical reasons or because I am missing something, VRX can rise, perhaps leaving its lows behind permanently.

If all the above new products do well, and if B&L can break out in Asia and elsewhere, then the leverage inherent in VRX shares may work for shareholders.

Conclusions

As usual, I write this article from the neutral standpoint of myself or other investor who has cash and is looking to invest it.

My view remains that VRX is de facto under the control of its creditors. I think it has been that way ever since it avoided a forced liquidation about 1 1/2 years ago. Looked at through this prism, the company’s behavior and comments in the conference call make sense. The lenders want the company to repay debt as the priority. In the meantime, cutting R&D and other costs and generating CFFO allow interest payments to be paid easily. Eventually, if some of the principal cannot be repaid, creditors are maximizing their recovery.

Joseph Papa, the new CEO, is not a magician. His history and that of the VRX team suggests there will not be the sort of magic that Steve Jobs accomplished when he rejoined a trouble Apple (AAPL) in 1997. It would appear doubtful that there would even be the turnaround of the sort that Howard Schultz led when he stepped back into the CEO role at Starbucks (SBUX) several years ago. Mr. Papa tried to relaunch Addyi, the “female Viagra,” but now the Sprout deal that brought Addyi to VRX with some fanfare has been acknowledged as a near-total failure.

If my fundamental analysis is mostly correct, then while I do not short stocks and provide no advice, I will comment that this may be a reasonable set-up for traders who do short stocks to think that VRX may be set for a more sustainable drop once again. Reasons that come to mind include:

  • Rally to a difficult level (near recent highs of the prior rally),
  • Siliq Rx data will be rolling in and may disappoint,
  • rotation to pharma/biotechs that have dropped recently while VRX has surged, such as Merck (MRK) and Regeneron (REGN), and
  • debt-heavy companies tend to falter when the Fed is tightening.

While it would be nice to see VRX succeed, producing wealth rather than disclosing all the wealth that prior management failed to crease, I continue to doubt that the stock ultimately has much if any value given the massive debt load.

Thanks for reading and sharing any comments you wish to contribute.

Disclosure: I am/we are long CELG, REGN, AAPL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Not investment advice. I am not an investment adviser.

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Verizon: A Recent Price Drop Means It's Time To Accumulate Shares

Investment Thesis

As mentioned before in my previous article (here) on AT&T (T) it is becoming more difficult to find quality dividend paying stocks from the S&P as the index has continued to reach all-time highs. In fact, since November 2009 the S&P 500 has returned nearly 150%

Chart

^SPX data by YCharts

When we consider the impact of the chart above and an average P/E ratio of 25.8 it raises the question: “Can an investor still find quality dividend-paying stocks in today’s market, or do we need to abandon quality in search of more reasonably valued securities?”

Less than a week ago I would’ve suggested that investors consider AT&T as the price difference between it and Verizon (VZ) and T-Mobile (TMUS) became too significant to ignore. Over the last few days, this price discrepancy has started to correct for AT&T but has begun to widen for Verizon. Given that Verizon stock finds significant support (over the last five years) at $43.75 I believe that the time has come to purchase shares of Verizon.

Chart

VZ data by YCharts

The remainder of this article will be used to establish why the opportunity to purchase AT&T at a discount is fading but Verizon’s continued drop in price has created an excellent buying opportunity for long-term investors and Dividend Growth Investors (DGIs).

Verizon’s Support Point

Looking at the five-year chart for Verizon it’s easy to spot where it support point is. To support my theory with Verizon, I will explain how I applied the same model to AT&T to figure out where its bottom would be.

It was my belief that AT&T support point would come as the dividend neared 6% and the stock made a significant balance at its new 52 week low of $32.55 (6.02% dividend yield). A 6% dividend yield wasn’t an arbitrarily chosen number as a five-year chart of AT&T shows that the stock reaches significant support around $32.50/share.

Source: Charles Schwab – AT&T 5 Year Chart

If we look at Verizon using the same methodology we can see a very similar support point that has been tested over the last five years.

Source: Charles Schwab – Verizon 5 Year Chart

For investors who are determined to buy the lowest possible point, they will likely need to wait, however, with speculation towards AT&T’s merger subsiding it is possible that Verizon may not reach the support point. In any event, picking up shares of Verizon has a lot of potential upside at its current price of $45.07.

PE Ratio Comparison

In a market where the average S&P 500 company has a P/E ratio of 25.8, it makes really good sense to purchase companies whose P/E ratios are significantly less (especially when those companies come from the same index). For investors who want a better understanding of a P/E ratio, I suggest reading 5 Must-Have Metrics For Value Investors.

Source: Charles Schwab – Ratios

Remember, the primary reason why I suggested investing into AT&T wasn’t based on P/E ratio, but because the merger in recent earnings miss had caused the stock to be disproportionately impacted when compared to Verizon and T-Mobile.

Now that that price disparity has begun to correct it is worth considering an investment in Verizon is its P/E ratio and forecasted P/E ratio are both less than 12. In other words, the market isn’t expecting much from Verizon and any positive news that comes out has the potential to serve as a catalyst upwards.

Cell Phone & Data Trends

A historical timeline of the cell phone industry and changing consumer trends paints a clear picture that the industry behemoths are set to dominate for years to come. The biggest advantage companies like Verizon and AT&T have is that it is extremely costly for a competitor to establish a quality network that can compete with their current capacity.

According to Pew Research, Almost every American owns a cell phone (approximately 95% of adults) but the real catalyst for the cell phone industry has been the adoption of smartphones which has grown from 35% in 2011 to more than 77% as of 2017. Consumer preference for smartphones has significantly increased margins for both AT&T and Verizon.

Teenagers serve as one of the fastest-growing groups of smartphone users especially in regard to data usage. In my previous article on AT&T, I came across the statistic that “teens have increased smartphone TV/video viewing 85% in 4 years.”

The statistics concerning millennials’ cell phone usage can be pretty overwhelming, if not, downright scary. A survey by Bank of America (BAC) gathered information from more than 1,000 people and found that 40% of millennials say “they interact more with their smartphones than they do with their significant others, parents, friends, children or co-workers.”

While I do not support these trends (call me an old soul), I cannot ignore them. It’s no wonder that every company is rushing to create a functioning mobile platform.

Dividend Coverage

Although Verizon doesn’t have the same track record as AT&T, I consider managements commitment towards increasing the dividend just as commendable. Here are some of the metrics concerning Verizon’s dividend:

Source: Dividend.com

In regard to dividend growth, Verizon comes out on top as their increases have been more favorable for shareholders by a small margin. I expect that Verizon will continue to increase the dividend by 3% on average every year until its other areas of business begin to generate more revenues. This is slightly more favorable than the roughly 2% average increase that AT&T offer shareholders.

The real beauty of Verizon’s dividend is that (much like AT&T) it is one of the highest paying S&P 500 stocks available that is not a real estate investment trust (REIT) or a master limited partnership (MLP). As a “qualified dividend” it makes this an excellent stock that can be held outside of a retirement account with favorable tax advantages.

Conclusion

Verizon’s closing price on Thursday of $45.07 has put the company on my radar. With a current P/E ratio and forward P/E ratio less than 12, I see Verizon as a common-sense investment for long-term investors and DGIs. I believe that Verizon’s current drop in price is largely due to the controversy associated with the telecom industry. Of all the telecoms, Verizon has exhibited the least amount of controversy when compared to AT&T, T-Mobile, and Sprint (S).

With an earnings beat for Q3-2017 under its belt and a very clear support level of $43.75, I see a bright future for Verizon going forward.

My clients are long VZ, T.

Final Note: If you enjoy my articles, please take the time to follow me. While I enjoy performing analysis, following me is the best method for showing me that SA subscribers are finding my work useful.

If you have any suggestions to improve my articles or if you would like me to perform analysis on a stock or your portfolio please feel free to message me and I will do my best to make it happen. I truly appreciate thoughtful feedback and would love to create content that is meaningful for my followers.

Disclosure: I am/we are long T.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article reflects my own personal views and is not meant to be taken as investment advice. It is recommended that you do your own research. This article was written on my own and does not reflect the views or opinions of my employer. I do not currently own shares of VZ, but I may choose to establish a position in the next 72 hours.

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