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?
1 answer:
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 <em>Price to Earnings ratio is relatively high</em> this means that the <em>Price of the security is high </em>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. <em>Lower Dividend Yields therefore mean high security prices</em>.
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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