Verizon Shoots Higher as Cowen Sees Stock as a Defensive Play

Analysts at Cowen say Verizon is due for a bounce as investors look for a high-dividend yielding defensive stock amid the storm.
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Shares of Verizon (VZ) - Get Report flew higher Monday on the wings of an upgrade by analysts at Cowen that highlighted the telecommunications giant as a good defensive play in a turbulent market.

Verizon's stock price rose 4.99% to $56.87 a share amid a wider market rebound and Cowen analyst Colby Synesael's decision to boost his rating on VZ to outperform, with a price target of $61 a share. 

While Verizon took a hammering from last week's broad, coronavirus-driven selloff, the Cowen analyst believes Verizon is due for a rebound as investors look for shelter amid the storm.

In particular, Verizon's high-dividend paying stock is likely to draw more attention from investors, with the yield on the 10-year Treasury, a competing safety play, having fallen to an anemic 1.04% Sunday night.

With Verizon's "well-covered" dividend generating 4.5%, the spread between what the telecom giant is paying investors and what they can earn on a 10-year Treasury note is the highest it has been in seven years, the Cowen analyst noted.

Ringing in at a robust 339 basis points, Verizon's dividend spread - compared to the 10-year Treasury - is well above its five-year average of 227 basis points.

"We are upgrading VZ … as we look to take advantage of the recent selloff with the stock now trading at a dividend spread (vs. the 10-year rate) not seen in 7+ years," Cowen's Synesael wrote.

Verizon's investment in 5G should also provide a catalyst for higher growth in future years, the Cowen analyst noted.

Verizon is in discussions with Walmart (WMT) - Get Report about a deal to wire the retailer's stores for 5G, starting with a pair of initial locations, The Wall Street Journal reported.