Today the market has been up and sideways basically, perhaps a little more defensive this afternoon,...
DRIP Investors can Dial Up Verizon
09/20/2013 8:00 am EST
One of the most consistent themes in the stock market is that you shouldn't try to outguess the market, because it will always surprise you, says dividend reinvestment specialist David Fish in Direct Investing.
But people try to do exactly that, often relying on historical patterns that are anything but guaranteed. Recent months are a perfect example. August provided a sharp downturn in stock prices, despite the fact that it has historically been a good month.
Likewise, September has been the worst month for stocks over the past several decades, but has proven quite positive this year (so far).
Investors trying to time the market have been sorely disappointed, but those who continue to use a dollar-cost averaging approach, as we often suggest, have not had to second-guess themselves.
Verizon (VZ), our latest featured DRIP recommendation, is one of the nation's largest telecom firms, with more than 290 million access lines and wireless customers.
The company began as Bell Atlantic with the 1984 breakup of the original AT&T and merged with GTE in 2000, also absorbing fellow Baby Bell NYNEX, as well as Alltel and MCI Communications.
Verizon has annual revenues of about $120 billion, half of which comes from its wireline operations in 28 states and half from wireless operations in all 50 states.
The company recently agreed to pay $130 billion to acquire Vodafone's 45% stake in Verizon Wireless, which should boost earnings by about 10% annually.
After earning $2.31 per share in 2012, earnings per share are expected to be about $2.78 this year and $3.25 in 2014.
The dividend has been increased for nine straight years and the $2.12-per-share annual payout results in a yield of 4.4%.
Note: Although the DRIP charges a $1-2 fee on reinvestment, participants can elect to receive the payout in cash (or direct deposit) and make no-fee investments by check or automatic debit.
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