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Feature Article

Interest Rates, Mergers, and Coal

By Roger S. Conrad on Oct. 1, 2013

Who says the bond market is washed out? Certainly not Verizon Communications (NYSE: VZ).

The company’s record $49 billion bond sale has not only locked in financing for its $130 billion buyout of Vodafone Plc’s (London: VOD, NYSE: VOD) minority stake in Verizon Wireless. But it was actually doubled, eliminating the need to raise funds in Europe.

The company did pay a slight premium to prevailing rates. But the offer was decidedly weighted toward longer-term debt, and at a cost well below most of the bonds on the balance sheet.

Verizon’s successful sale assures the Vodafone buyout will be hugely accretive to its long-run growth. And I’ve added the stock to the Conservative Income Portfolio as a result, with a buy-up-to-target of 48. The company also boosted its quarterly dividend another 3 percent, a further vote of confidence by management.

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