Verizon is a buy; attractive yield and undervalued relative to fair value.

Passive income investors look at Verizon and AT&T and their dividend yields, and think that these look like attractive opportunities. I have rated Verizon stock as a buy,

But which is the better investment? I mentioned the attractive dividend yields, with Verizon having a yield of 5.9% over the past twelve months, For Verizon, this return is better than what you can get from investing in 10, 20, or 30-year U.S. government bonds.

Organically speaking, both AT&T and Verizon achieved reasonably good revenue growth, given their saturated markets. But when looking at revenues organically, they were growing at a modest rate, and the same was true for Verizon, which is to be expected of them.

Their revenues will not double. Their revenues will not grow at double-digit rates for any significant period of time. The market is already saturated. These are things that increase the average revenue per customer for AT&T and Verizon.

Profitability was solid and improving for the most part.

while for Verizon they improved to 22.7% from 21%.

One of the key things to consider for AT&T and Verizon is upgrade cycles.

Verizon's returns on invested capital have been on a downward trend from about 12% to 6% recently. This is so that it does not exceed the company's weighted average cost of capital.

Verizon has had moments where it exceeded 20%, but it has remained below 10% for most of the past decade.

Verizon stock is trading at a forward price-to-earnings ratio of 8.9, slightly lower than AT&T. Similarly, for Verizon, I calculated a fair value for the stock at $55. The current market price is $47.

It also appears to be undervalued, but to a lesser extent than AT&T.