What Is The Capital Structure Of Verizon Company

Brief Description of Verizon Company
Verizon communications Inc is an American company that was established in June 2000 when bell Atlantic merged with GTE and the merger took 2 years to close. In 2004 it was added to the Dow Jones industrial average. In 2006 Verizon became the primary provider of advanced communications to large businesses and government sector. Verizon offers the largest high speed 3G and 4G network in America and delivers solutions that allow customers to connect securely.
Corporate Governance Analysis
The interest of shareholders is protected by the corporate governance frame work which is rooted deeply in company's core values and these values are incorporated in the company's corporate governance guidelines. Board of
Directors is tied by highest level of corporate governance and supervises the management of risks inherent in the company's businesses and application of its strategic plan. All directors stand for yearly election. Board monitoring is effected through company's standing committees: Human resources, finance, audit and corporate governance and policy. Each committee monitors the management of company risks falls under its areas of responsibilities. The board periodically reviews the corporate governance guideline.
Business of the corporation is undertaken by the management under the guidance of the board of directors. The board conducts strategic planning meeting with management once a year and discuss management development and succession planning. Directors' compensation and benefits are periodically reviewed by the Human resources committee based on the review of comparable companies and to align management’s interest with the shareholder interests’.
Verizon (ticker symbol: VZ) is listed on the New York Stock Exchange and the NASDAQ Global Select Market.(website:www.verizon.com).Verizon provides the necessary information about the firm to the financial market.
Verizon promotes social responsibilities by using advanced technology to increase social change in health care, education and energy management. Verizon encourages its employees to support nonprofit organizations; according to Verizon in 2013 its employees volunteered over 428,000 hours for charity work.

Stock Holder analysis
Major Holders:
Figure1 Major Holder’s breakdown Source: https://finance.yahoo.com/q/mh?s=VZ+Major+Holders
Figure 2 Major direct holders Source: https://finance.yahoo.com/q/mh?s=VZ+Major+Holders
Figure 3 Top institutional holders Source: https://finance.yahoo.com/q/mh?s=VZ+Major+Holders

Figure 4 Top mutual fund holders Source: https://finance.yahoo.com/q/mh?s=VZ+Major+Holders

Risk Profile and Capital Structure
Many risk factors can affect Verizon’s performance and future results:
• US economic conditions can affect Verizon’s operations.
For example recession can affect customers’ ability to spend which will result in low demand for Verizon’s products and services.
• Verizon’s profits can reduce significantly due to competition in the telecommunication industry as development of new technologies can bring new competitors to this market.
Verizon is exposed to many types of market risk such as interest rate and foreign exchange rate which has an effect on Verizon’s earnings.
Below figure 5 summarizes the capital structure of Verizon; it is obvious that company is increasingly depending on debt to finance its overall operations. This approach can be attributed to its deal with Vodafone to obtain the 45% stake in Verizon’s using the low interest rate offer to fund this acquisition. Verizon financed this deal by 50:50 split of cash and stock. Verizon’s debt level could have negative impact on it operations as the firm will have to utilize its cash flow from its operations to pay its debt which will make financing for working capital very expensive. Also any increase in the interest rate could increase the borrowing cost for Verizon. Currently 3.66% is the cost for the company to maintain share price to satisfy the
investors.

Figure 5 Capital structure Source: http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=vz
Weighted average rate of return (WACC) for Verizon is 3.25% and Verizon has to earn minimum 3.25% to satisfy investors who use this tool to value all Verizon's projects.
WACC= Total Equity/Total Firm Value*Cost of equity +Total Debt/Total Firm Value*Cost of Debt*(1-Tax Rate) = 3.25%
Beta for Verizon is 0.03 as reported by Yahoo Finance and since it is a good measurement of systematic risk; when Beta increases WACC will increase as well and investors can expect higher rate of return. Since Beta is 0.03 we can conclude that its security price will be less volatile than the market.
Figure 6: Element from Financial Statements
Cost of Debt 3.66%
Corporate Tax Rate 10.78%
Total Debt 72,789,000,000
Total Equity 213,120,000,000
Total Firm Value 285,909,000,000
Cost of Equity 3.24%
Source: Verizon Annual
report
Dividend Policy
According to street insider "Verizon declared a quarterly dividend of $0.55 per share, or $2.2 annualized. This is a 3.8% increase from the prior dividend of $0.53.The dividend will be payable on November 3, 2014, to stockholders of record on October 10, 2014, with an ex-dividend date of October 8, 2014.The annual yield on the dividend is 4.4 percent. This is the eighth consecutive year that Verizon's Board of Directors has approved a quarterly dividend increase."(Website: http://www.streetinsider.com)
Verizon’s strategic move to buy the remaining stake in Verizon’s wireless from Vodafone proven to be successful. Verizon’s pays out high dividend yield (around4.5% currently) to the investors. If we look at Verizon’s dividend history we notice that it has increased every year since 2006.
Verizon could increase the share value by using the excess cash to buy back shares or instead of paying the dividends in cash it can issue new shares to finance the firm's operations. Advantage of stock repurchasing is the taxes paid on capital gain are lower that income tax hence this can add more value to the share holders.

References:
Corporate facts sheet. (2014). Available: http://www.verizon.com/about/sites/default/files/Verizon_Fact_Sheet.pdf. Last accessed 6th November 2014.
Verizon History and Timeline. (2014). Available: http://www.verizon.com/about/sites/default/files/Verizon_Corporate_History.pdf Last accessed 6th November 2014.
Corporate Governance guidlines. (2014). Available: http://www.verizon.com/about/sites/default/files/Corporate-Governance-Guidelines.pdf
Last accessed 7th November 2014.
Stock Information. (2014). Available: http://www.verizon.com/about/investors/stock-information/
Last accessed 7th November 2014.
Verizon Communications Inc. -- Form 10-K. (2013). Available: http://secfilings.nasdaq.com/edgar_conv_html%2f2014%2f02%2f27%2f0001193125-14-073266.html#D622994D10K_HTM_TX622994_2. Last accessed 10th November 2014.

Bob Ciura . (2014). What Verizon Dividend Investors Need to Know In September. Available: http://www.fool.com/investing/general/2014/09/16/what-verizon-dividend-investors-need-to-know-in-se.aspx. Last accessed 10th November 2014.
Verizon Communications (VZ) Raises Quarterly Dividend 3.8% to $0.55; 4.4% Yield. (2014). Available: http://www.streetinsider.com/Dividend+Hike/Verizon+Communications+%28VZ%29+Raises+Quarterly+Dividend+3.8%25+to+%240.55%3B+4.4%25+Yield/9806781.html.
Last accessed 10th November 2014.

Verizon Communications Inc. (2014). Available: https://www.google.com/finance?q=NYSE%3AVZ&fstype=ii&ei=02psVLj7MpOTwQObzoGYCw. Last accessed 19th November 2014.
Verizon Communications Inc. (2014). Available: http://finance.yahoo.com/q?s=VZ
Last accessed 19th November 2014.
Definitions. (2014). Available: http://www.investopedia.com/terms/r/returnonequity.asp Last accessed 19th November 2014