Shares of the internet address registry VeriSign (VRSN 0.09%) rallied 11.1% in April, according to data from S&P Global Market Intelligence.
In the turbulent times following the April 2 “Liberation Day” tariff announcements, VeriSign’s monopolistic, annuity-like business remained a safe haven for investors.
In addition, the company delivered a better-than-expected earnings report and announced its first-ever dividend. In response, shares grew by double digits, greatly outperforming the S&P 500, which was down 0.68% in the month.
A first-ever dividend
In the first quarter, VeriSign grew revenue 4.7% to $402.3 billion and earnings per share by 9.4% to $2.11, with both figures coming in ahead of expectations.
VeriSign is the internet registry for .com and .net domain names, so it is essentially levered to the growth of internet addresses. While domain names were down 1.5% year over year, they were also up by 0.78 million names during the quarter, reaching 169.8 million domain names between .com and .net by the end of the quarter. Revenue growth has been due to price increases last year.
Perhaps more importantly, VeriSign also upped its full-year guidance, increasing its domain name growth outlook from a 2.3% to 0.3% drop to a new range of a 0.7% drop to 0.9% growth. So the better-than-expected first quarter led to hope for overall growth in the domain name base this year, whereas the company had initially expected a decline. Revenue guidance was also raised from $1.625 billion to $1.643 billion, and operating income guidance was raised at the midpoint from $1.105 billion to $1.118 billion.
The company also made news with its first-ever quarterly dividend announcement of $0.77, which the company intends to maintain on a quarterly basis and grow in the years ahead. VeriSign had always returned a lot of cash to shareholders in the past, but always in the form of share repurchases. The current dividend yield is 1.08% at the current share price.
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Buffett made another great trade
Warren Buffett or one of his lieutenants made another great trade in VeriSign at the end of last year, with Berkshire Hathaway (BRK.A 0.06%) (BRK.B 0.49%) adding to its VeriSign stake in the fourth quarter. The stock is already up 37% in 2025, vastly outperforming the market.
However, the dividend announcement could be an acknowledgement by management that the stock isn’t very cheap right now, at 32 times this year’s earnings expectations. At a mid-single-digit growth rate, that’s not exactly a cheap stock.
Share repurchases make more sense when one’s stock price is low, so perhaps the move for a dividend payout is an indication that type of shareholder return makes more sense at this valuation.
In any case, VeriSign remains a high-quality, quasi-monopoly; however, it appears the discount that Buffett’s team saw late last year has largely closed.
Billy Duberstein and/or his clients have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and VeriSign. The Motley Fool has a disclosure policy.
