Question

The World Equity Index function shown contains two valuation metrics for the S&P 500. The Verizon description page contains the same two valuation metrics. How does Verizon's valuation compare to that of the S&P 500?

Answer 1

Answer: Verizon is less expensive than the S&P 500 on both a P/E and dividend yield basis.

Step-by-step explanation:

When a Price to Earnings ratio is relatively high this means that the Price of the security is high because investors believe the company has good prospects.

When a Dividend Yield is relatively low, this means that the dividends being declared are quite lower than the price because Dividend yield is dividends as a percentage of security price. Lower Dividend Yields therefore mean high security prices.

Looking at the Verizon Chart and the S&P 500 you see that Verizon P/E ratio is 11.71 while S&P is 19.01.

This means that the price of Verizon's is less than S&P 500.

Also notice that Verizon's Dividend yield is 4.09% while S&P 500's is 1.91% again signifying that Verizon is cheaper.

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