Could This Bear Market Buy Help You Become a Millionaire?

Verizon Communications (NYSE: VZ), one of the largest telecom companies in America, is often considered a safe-haven stock during bear markets. Its growth rates are anemic, but it runs a stable business, has a wide moat, and pays a high dividend.

Verizon, like many other defensive stocks, usually delivers unimpressive gains during bull markets. The S&P 500 has risen 51% since the current bull market started on Oct. 12, 2022, but Verizon has only advanced 28% during the same period.

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However, Verizon's stock has also rallied 14% this year as the S&P 500 slumped 8%. It outperformed the market as the Trump Administration's tariffs, sticky inflation, and elevated interest rates sparked fears of another recession.

A new bear market hasn't officially started yet, but investors seem to be accumulating Verizon again to hedge against another economic downturn. That might be a prudent move, but could this blue chip stalwart make you a millionaire as well?

Verizon hasn't been a millionaire maker

Over the past 20 years, Verizon's stock only rose 34%. A $10,000 investment would have grown to $13,400 and be paying out about $880 in annual dividends. If you had consistently reinvested your dividends, that investment would have grown to $38,820 and it would be generating $2,450 in annual dividends.

That's a decent return, but it didn't mint any new millionaires. If you had simply invested $10,000 in an S&P 500 index fund during those 20 years, it would have grown to about $43,140 -- or $67,760 with reinvested dividends.

Verizon didn't beat the market because it has grown at a glacial rate. From 2004 to 2024, its adjusted earnings per share (EPS) only had a compound annual growth rate (CAGR) of 3%.

Meanwhile, its year-end debt more than quadrupled from $39.3 billion to $168.4 billion, mainly due to its $130 billion buyout of Vodafone's 45% stake in Verizon Wireless in 2014. That sluggish earnings growth and high debt prevented its stock from taking off over the past two decades.

What will happen to Verizon over the next two decades?

Verizon struggled to gain new wireless subscribers throughout 2023. It mainly blamed aggressive promotions from AT&T, T-Mobile (which merged with Sprint in 2020), and other smaller competitors for that slowdown.

But in 2024, it more than doubled its postpaid phone net additions. It attributed that acceleration to its localized incentives and marketing campaigns, the growing popularity of its customized myPlans, and a successful distribution partnership with Walmart (NYSE: WMT). Its wireless retail churn rate also dropped from 1.67% in 2023 to 1.62% in 2024.

For 2025, the company expects its wireless revenue to grow 2% to 2.8%. It's still relying heavily on promotions to gain new customers, but it's also been aggressively cutting costs to offset that pressure. It expects its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to grow 1% to 3% for the year.

With an enterprise value of $329 billion, Verizon still looks cheap at 7 times this year's adjusted EBITDA. Its high forward dividend yield of 6.1% could also limit its downside potential. However, there aren't too many catalysts on the horizon that could drive more investors to pay a higher premium for its stock.

So could Verizon be a millionaire maker?

Therefore, it's reasonable to expect the company's adjusted EPS and EBITDA to keep having a CAGR of 3% over the next 20 years. If it does that and still trades at seven times its forward adjusted EBITDA, its stock could rally more than 90% to around $88 a share by the beginning of 2045.

That would be a decent 20-year gain, but it would probably still underperform the S&P 500, which has delivered an average annual return of more than 10% since its inception in 1957.

So, while Verizon might be a good place to park your cash, dodge the tariffs, and earn some extra income, it definitely isn't a stock that will consistently beat the market or generate millionaire-making gains.

Should you invest $1,000 in Verizon Communications right now?

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Leo Sun has positions in Verizon Communications. The Motley Fool has positions in and recommends Walmart. The Motley Fool recommends T-Mobile US, Verizon Communications, and Vodafone Group Public. The Motley Fool has a disclosure policy.