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Income Investing

Dialing for Dollars

By Roger S. Conrad, on Jun. 29, 2015

Verizon Communications (NYSE: VZ) last week closed its $4.4 billion purchase of AOL, a deal that gives the nation’s best-in-class wireless carrier the advertising technology to help monetize its push into mobile video.

Not only does the deal make strategic sense for Verizon Communications, but the transaction also closed in 42 days—a testament to management’s ability to navigate a challenging regulatory environment.

The wireless giant has almost completed its 4G wireless network; boosting data consumption is the new challenge. In the first quarter of 2015, the company’s “More Everything” accounts grew average data use by 54 percent, while 4G connections accounted for almost 86 percent of the firm’s wireless data traffic.

The acquisition of AOL adds the Huffington PostEngadgetTechCrunch and other digital properties to Verizon Communications’ empire; leveraged appropriately, content from these popular sites should help to drive wireless traffic.

When Verizon Communications releases financial results on July 21, we expect the wireless segment to post another quarter of rising 4G adoption, high-margin customer additions and low customer attrition rates.

Meanwhile, the firm’s wireline operations should continue to benefit from growing adoption of its FiOS offering. These high-speed fiber-optic connections and related products accounted for 78 percent of the division’s first-quarter revenue.

And Verizon Communications’ ongoing dispute with New York City over the pace of FiOS deployment underscores the explosive demand for the service in areas where these connections aren’t yet available.

A solid second quarter will keep the company on track to hike its dividend by the customary $0.02 per share in September.

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