You’ve probably heard about AT&T‘s (NYSE: T) $85 billion purchase of Time Warner. This mega-deal follows AT&T’s $49 billion purchase in 2015 of DirectTV.

It’s clear that AT&T made these huge splashes to diversify from its core telecom business. But big moves don’t always work out.

What about AT&T’s main rival, Verizon Communications (NYSE: VZ)? If you’re looking for a stable income-generating asset, should you buy or avoid Verizon stock in 2019?

Verizon has not followed AT&T with deals of similar magnitude. Verizon did buy AOL and Yahoo‘s Internet assets in recent years, but those deals totaled less than $10 billion.

As stock market conditions grow more volatile, what do we see in Verizon’s future?

What Is Verizon?

Verizon was formed in 2000 by the merger of Bell Atlantic and GTE Corp. To this day, the $65 billion deal is still one of the largest mergers in U.S. history.

By subscriber count, Verizon is the largest wireless communications service provider with more than 150 million wholesale and retail subscribers. AT&T is a close second with more than 140 million.

Verizon currently has the largest 4G network in the U.S., with 4G LTE coverage in areas covering about 300 million people.

Besides wireless voice and data services, Verizon also offers wireline products and services to retail consumers and businesses. These services include Internet, TV and voice.

The company also has been developing fixed and mobile 5G wireless services. It has rolled out 5G networks on a trial basis in parts of four cities in 2018.

How Has Verizon Stock Performed?

What Is Verizon Stock History?

In recent years, as the general stock market has risen, investors have favored growth stocks over the shares of traditionally conservative companies like telecoms and utilities.

As a result, Verizon stock has returned modest gains over the past five years as the chart shows. However, people invest in Verizon stock for income. In that regard, Verizon continues to deliver.

The company has steadily increased its dividend every year. Over the past 5 years, its annualized dividend growth rate is roughly 2.7%. The stock yields 4.3%.

How Has Verizon Performed In 2017/2018?

In 2017, investors favored growth stocks as the bull market continued apace. As a result, as with other income-oriented stocks, Verizon was a laggard, essentially breaking even for 2017 after adjusting for dividends.

But 2018 has been different. The chart shows how Verizon has fared relative to the S&P 500.

For most of the year, Verizon underperformed the S&P. However, since the stock market started falling in October, Verizon (the blue line) has diverged from the index in a good way. Its defensive qualities shined through the market’s turbulence.

Who Are Verizon’s Rivals?

AT&T (NYSE: T)

Although AT&T is diversifying away from its traditional telecom business, it is still Verizon’s main competitor. The two companies are the clear #1 and #2 U.S. mobile carriers in terms of revenue and subscribers.

AT&T has transformed into a diversified media and telecom company. It’s fair to question how much synergy the two businesses will offer.

Wall Street doesn’t seem to think the benefits outweigh the risks. It has punished AT&T stock for its growing debt, which has ballooned to about $190 billion after the Time Warner purchase.

On the flip side, AT&T generates considerable annual cash flow. In 2019, after paying dividends, it should still have about $12 billion in cash to pay down its debt.

How well the company manages the combination of its now two core businesses will determine whether the Time Warner purchase was wise or Wall Street is right.

AT&T has no doubt taken on downside risk, but its potential upside has also grown higher.

Sprint (NYSE: S)

Sprint has long trailed Verizon and AT&T. The company historically has suffered from a bad brand image. Its network quality tends to rate the worst among the top-4 U.S. carriers and its national coverage is the smallest.

Sprint has a major asset, though. Its unused spectrum holdings are the best among U.S. telecoms to handle the demands of 5G wireless technologies.

Spectrum is the radiowave frequencies used in wireless communication. Since the available range is finite, spectrum is a valuable asset for telecoms.

The key for Sprint is whether it will be able to win regulatory approval to merge with T-Mobile. If the number 3 and number 4 companies can combine, they have a much better chance to take on Verizon and AT&T.

If the merger falls through, Sprint is probably in trouble. On its own Sprint doesn’t have the network quality or capital to take full advantage of its spectrum assets.

T-Mobile (NSDQ: TMUS)

In 2013, T-Mobile acquired MetroPCS. Since then, the company has done a great job integrating the two companies. Its reputation among customers has greatly improved.

Combining its better reputation with a price-discount strategy, T-Mobile has gained significant market share in the last few years. It has increased its postpaid customer base by some 75% in the past five years (but it still clearly lags between Verizon and AT&T).

The downside to charging a low price is that it keeps margins low. T-Mobile also operates at a scale disadvantage to the Big Two, so on its own it won’t present a big challenge to either Verizon or AT&T.

If the proposed merger with Sprint goes through, T-Mobile would be much better positioned to mount a greater challenge.

But even without a merger, T-Mobile has solidified itself as the clear number-3 carrier.

Will Verizon Go Up In 2019 (Should You Buy)?

Verizon didn’t become the owner of the highest-quality wireless network by luck. Over the years the company has worked hard to build and improve its network, the broadest in the U.S.

Its network is not only the broadest but also the highest quality. Its reputation is excellent and its churn rate (the percentage of customers who leave) is consistently the lowest in the industry. It’s also consistently the most efficient carrier, with strong and improving profitability.

Not being distracting by major acquisitions, Verizon is pushing forward with improving its telecom business, developing 5G technology and expanding its fiber optics network. The company appears determined to firm up its position as the industry leader.

The company is taking the lead in rolling out 5G technology to residential customers, and it could open up new avenues for growth.

Even if Sprint and T-Mobile do merge and create a stronger third competitor, it is not necessarily a bad thing.

With three major players remaining with stable customer bases, it’s less likely that anyone will try to steal market share by lowering prices.

If market volatility persists, a conservative stock like Verizon should provide some defense for nervous investors.

Will Verizon Go Down In 2019 (Should You Sell)?

AT&T is taking a major gamble and could fall on its face. But on the flip side, it also has the higher potential. By being more conservative, Verizon remains in a strong position for what it is, but there isn’t a ton of growth potential here.

As well run as Verizon is, telecom is still a low-growth business. If the stock market improves, investors are likely to favor growth stocks again.

Although Verizon is taking a lead in testing 5G technology for residential customers, its endeavors could turn out to be counterproductive.

5G is still new and there’s no standard set yet. What comes down the road could be different than Verizon’s current focus. Its competitors could still end up with the leadership in 5G despite Verizon’s early start.

Verizon recently took a $4.6 billion write-off on Oath, the combination of AOL and Yahoo assets that it bought. The company will rebrand the division as Verizon Media Group.

Buying AOL and Yahoo was Verizon’s attempt to branch into media and content, but it just isn’t working out as well as it had hoped. This is a reminder that it won’t be easy for Verizon to find ways to boost growth from outside its comfort zone.

Overall Verizon Forecast and Prediction For 2019

Verizon should continue to be a steady stock in 2019. Whether it outperforms the general market will mostly depend on how stocks perform next year.

If investor risk appetite is high, as it was in 2017, then Verizon will under-perform, but if instead investors are risk averse, Verizon will likely outperform the market, as it did this year.

Although Oath has been a failure, given Verizon’s size, the $4.6 billion hit was not a total disaster. This division will remain a peripheral part of the company.

The company’s core business remains the best in the industry. With some economic slowdown expected in the months ahead, not taking on additional gambles as AT&T did is probably a prudent strategy.

Rather than trying to expand into a new area, Verizon is just trying to do what it does even better.

With a loyal customer base and dependable cash flow generation, Verizon will remain a strong choice for income investors who just want a worry-free source of dividend payments every quarter.