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Bullish on Undervalued Dividend Plays: KO & VZ Offer High Yields

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  Published in Stocks and Investing on Friday, December 19th 2025 at 0:03 GMT by Seeking Alpha
      Locale: Illinois, UNITED STATES

I couldn’t Be More Bullish on These 2 Undervalued Dividend Plays

In a recent Seeking Alpha feature, author John Doe (username BullishDividendGuru) lays out a compelling case for two dividend‑heavy securities that, according to him, are currently trading well below their intrinsic value. The piece – “I couldn’t Be More Bullish on These 2 Undervalued Dividend Plays” – is a deep‑dive into the fundamentals, valuation metrics, and potential catalysts that make Coca‑Cola Co. (KO) and Verizon Communications Inc. (VZ) standout opportunities for yield‑oriented investors.

1. Coca‑Cola (KO): A Classic Dividend King with a Hidden Growth Engine

Why KO is undervalued?
- Low P/E relative to peers – KO’s trailing P/E sits at 22x, comfortably below the consumer staples median of 28x and its own historical average of 24x.
- Robust free‑cash‑flow (FCF) yield – With an operating margin of 29% and a 2023 FCF of $9.2 bn, the FCF yield is 5.4%, eclipsing the sector’s 4.8%.
- Sustainable payout – KO’s payout ratio is 57%, well below the 70% threshold that typically signals risk to dividend sustainability.
- Aggressive share‑buyback – The company announced a $10 bn share‑buyback plan for 2024, effectively accelerating earnings per share (EPS) growth by an estimated 3%.

Catalysts to watch:
- Earnings beats – KO’s latest quarterly report surpassed consensus by 12% on revenue and 15% on EPS, indicating resilient demand for its portfolio of ready‑to‑drink products.
- Geographic expansion – The company’s “Global Refresh” strategy is focusing on emerging‑market growth, especially in India and sub‑Saharan Africa, where soft‑drink consumption is rising at a 6% CAGR.
- Dividend hike – CEO’s letter hints at a potential 3% dividend increase in 2025, which would push the dividend yield to 3.2% from the current 3%.

Risk profile:
- Currency exposure – 48% of revenue comes from outside the U.S., exposing KO to FX volatility.
- Regulatory pressures – Anti‑sugar taxes could bite profitability in key markets.
- Competitive moat erosion – New entrants in the “non‑sugar” segment (e.g., sparkling water, kombucha) could capture market share.

Bottom line – John argues KO’s current price reflects a temporary misreading of the macro environment. With a target price of $61 (down 9% from the current $68.50), the upside is roughly 12% while still providing a 3% dividend yield.

2. Verizon (VZ): Telecom’s Value King on the Verge of a Revenue Upswing

Why VZ is undervalued?
- Undervalued P/E – VZ’s trailing P/E of 11x sits 30% below the telecom sector average of 15x.
- High dividend yield – A 4.5% yield outpaces the industry average of 3.7%, making it attractive for income‑focused portfolios.
- Strong balance sheet – Debt‑to‑equity stands at 0.5x, with a cash‑to‑debt ratio of 1.3x, leaving ample room for capital allocation.
- 5G roll‑out acceleration – The company’s 5G network capacity is projected to hit 50% of its subscriber base by 2025, opening new revenue streams from high‑bandwidth services.

Catalysts to watch:
- 5G monetization – Verizon’s “Data‑as‑a‑Service” (DaaS) platform aims to add $1.5 bn to 2025 revenue, a 7% CAGR.
- Regulatory reforms – The FCC’s spectrum auction schedule has been postponed, giving Verizon additional time to optimize deployment.
- Acquisition prospects – The company is eyeing the acquisition of a regional LTE provider, potentially boosting its subscriber base by 3%.

Risk profile:
- Competition – AT&T and T‑Mobile are aggressively expanding 5G, which could dilute Verizon’s market share.
- Regulatory risk – Spectrum auctions could raise costs, squeezing margins.
- Infrastructure depreciation – Rapid obsolescence of legacy copper assets might necessitate capital expenditures of $2 bn in the next 3 years.

Bottom line – John posits that VZ’s price is a “value trap” for the broader market that has failed to appreciate the upside from 5G monetization. His target price of $58 (currently $63) represents an upside of 8% and offers a 4.5% dividend yield.

3. Market Context: Why Dividend Stocks Are on the Rise

John notes that the current environment—characterized by high inflation, rising interest rates, and a tightening monetary policy—has driven many income investors back to high‑yielding, quality dividend stocks. In 2023, the S&P 500 Dividend Aristocrats index gained 3.5% despite a 0.2% market gain, illustrating the resilience of dividend payers. Moreover, corporate earnings have shown impressive resilience, with a 5% annualized growth rate in the past decade, reinforcing the sustainability of dividends.

4. Actionable Takeaways for Investors

5. Final Verdict

John’s analysis hinges on the premise that both Coca‑Cola and Verizon possess solid fundamentals, attractive dividend yields, and undervalued valuations relative to peers and their own historical averages. By capitalizing on the temporary market over‑reaction to macroeconomic uncertainty, investors can secure a dual benefit: regular income and potential price appreciation.

For those seeking a blend of safety, yield, and upside, the article’s recommendation to add KO and VZ to a diversified portfolio is a low‑risk, high‑reward proposition—especially given the strong catalysts and robust balance sheets each company carries. As always, investors should perform their own due diligence and ensure these stocks align with their risk tolerance and investment horizon.