Apple AAPL is getting an upgrade, and will soon be trading among the Dow 30.  When one stock gets the privelage of being one of the 30 stocks comprising the Dow Jones Industrial Average, one stock gets kicked out of the index.  This is the case with AT&T (T), which will be leaving the index so that AAPL can join.

The peculiar thing about all this is the fact that AT&T got kicked out and not Verizon (VZ), which will stay among the Dow 30.  Investors have been speculating about why one was chosen and not the other. 

We aren't here to say one of these stocks is better than the other.  As a matter of fact, they are similar companies that do many of the same things.  When comparing the two, it ultimately comes down to what your style of investing is, which we will get to at the end.

Among the things these companies have in common are their Zacks Ranks.  AT&T and Verizon both have a Zacks Rank #3 (Hold).  Their beta and PE are nearly identical.  AT&T has an earnings ESP of 2.94%, while Verizon's is 1.06%.  Both companies also give out sizable dividends, with AT&T and Verizon doling out yields of 5.53% and 4.45% respectively. 

Verizon has notable growth statistics which outperform AT&T.  It has a PEG of 1.6, while AT&T's is 3.09.  Verizon's net profit margin is also favorable in comparison to AT&T, with profit margins of 7.66% and 4.7% respectively.  Verizon's ROE of 87.71% is on another level in comparison to AT&T's 14.4%.  The growth rate for Verizon this year is 9%, while AT&T's is 1%.

AT&T has some key valuation statistics which are superior in comparison to Verizon (VZ).  It doles out a dividend 1% higher than Verizon's.  It also has a superior earnings ESP.  The debt to equity ratio is on another level compared to Verizon, with AT&T having a ratio of 0.87 and Verizon having debt/equity of 8.08.  AT&T has a price to cashflow of 5.62, while Verizon's is 6.8.  Additionally,  AT&T and Verizon's price to book ratios are 2.03 and 14.84 respectively.

Probably the biggest reason for the exclusion of T is the relative size of the company when compared to VZ. Verizon just edges out AT&T in terms of market capitalization—by roughly $20 billion-- and this must have played a role in deciding which company to kick out in the telecom space.

Bottom Line

Ultimately, you may have your preference with either stock depending on your investing style. If you like extra security and a firm investment based on fundamental valuations, AT&T is probably your preference.  If you like more growth and aren't as picky about valuation, Verizon is likely your preference.  Again, these companies are quite similar, so it's not black or white investing in either.  As these are both Zacks Rank #3, there are better choices out there, though.

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AT&T INC (T): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
APPLE INC (AAPL): Free Stock Analysis Report
 
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