VZ — Verizon Communications

Will it survive?

• Can it pay its interest? 5.3×
  Comfortable
  Operating income $29.3B ÷ interest expense $5.5B

  Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient — it says solvent, not cheap.

• How heavy is the debt? 3.7×
  Moderate
  Total debt $108.3B ÷ operating income $29.3B

  Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.

• How long is cash tied up? -8d
  Negative — funded by others
  DSO 63 + DIO 18 − DPO 89 days

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”) — the company grows on other people's money.

Is it a good business?

• Return on invested capital —
  Not enough data

  The filing data didn't include the inputs for this check.

• Owner Earnings (free cash) margin 15%
  Solid
  Owner Earnings $20.5B = operating cash $37.1B − capex $16.7B

  What an owner could take out without starving the business. That's 15% of revenue. Treating stock comp as the real expense it is (less $400M of SBC) leaves $20.1B. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).

• Are earnings backed by cash? 2.16×
  Cash-backed
  Cash from ops $37.1B ÷ net income $17.2B

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy — growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? 56%
  Returns about half
  Dividends + buybacks $11.5B ÷ Owner Earnings $20.5B

  Of $20.5B Owner Earnings, $11.5B (56%) went back to shareholders — $11.5B dividends, $0 buybacks. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway — or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? 0.91×
  Maintaining
  Capex $16.7B ÷ depreciation $18.3B

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth — or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency — or a melting asset base). The ratio won't tell you which; the filings will.

Durability — 2016–2025

A moat is high return that doesn’t fade. Here are the quality metrics across a full cycle — judge the consistency, not the latest dot.

• Return on invested capital
  history pending —
• Operating margin
  21%
• Owner Earnings margin
  14%