Anything Blue Can Do Red Can Do Better: Verizon Communications Inc. (VZ), AT&T Inc. (T)

Where Verizon is unmatched is in their dividend and payout ratio combination. Verizon pays a current yield of about 4.75% versus AT&T’s yield of roughly 5.2%. While Verizon’s yield is lower, their free cash flow payout ratio is significantly lower. In the last three months, Verizon used just 34.16% of its free cash flow to cover the dividend, AT&T used 51.96% of their free cash flow. Since neither Sprint nor MetroPCS pay dividends, they can’t match their bigger competition if income investors come calling.

Don’t Mess With The Rest, Buy The Best
Investors have several investment choices, but the numbers don’t lie. AT&T pays a yield at 5.21%, which is better than Verizon, but has a lower expected growth rate of 5.68%. Sprint can only be considered as a turnaround story, as analysts are forecasting a loss for 2013, and just 5% EPS growth in the next five years. MetroPCS might look attractive, with analysts looking for EPS growth of 13.82%, and the shares trading for about 13 times earnings. However, MetroPCS has a higher churn rate, net subscriber losses, and a debt-to-equity ratio that is two times higher than AT&T and nearly three times higher than Verizon.

In nearly every financial and subscriber metric, Verizon outperforms their competition. Investors receive a 4.75% yield and analysts expect 7.98% EPS growth. The company has the lowest churn rate, the best margin, and highest subscriber additions of any of the companies we’ve looked at. The bottom line is, anything blue (AT&T) can do, red (Verizon) can do better. To be honest, Verizon is doing almost everything better than anyone else in the industry.

The article Anything Blue Can Do Red Can Do Better originally appeared on Fool.com and is written by Chad Henage.

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