Verizon Communications (VZ) is a telecom giant with a stock that often attracts income-oriented investors, thanks to its dividend. Going back 10 years, the company’s stock has given investors a 22.2% raise, as its dividend increased from $2.14 per share per year in 2014 to $2.64 in 2023, comments John Gardner, founder and principal of Blackhawk Wealth Advisors’ Market Insights.
Verizon’s recent dividend yield was 7%. For perspective, that is significantly higher than the recent yield of 1.5% for the S&P 500.
Verizon’s dividend yield is also higher than the company's 10-year bond (maturing 5/9/2033), which currently yields 5.17%. Verizon has paid out a dividend every year since 1984. Over that 39-year period, Verizon’s dividend has increased from $0.80 to $2.64.
Here’s another noteworthy fact for this income generator: Over the last 10 years, Verizon has paid investors $24.07 per share in dividends. Its stock price was about $30 per share in January of 2014. So, investors have nearly received their initial investment back (80%) in stock dividends.
An income-oriented investor should always make a diligent choice between stocks for dividends versus bonds for interest. This is only if corporate investment securities are suitable. In the case of Verizon, an income investor will likely gain a significantly higher total return from the company’s stock over its bonds.
Not only is the current stock dividend higher than the current bond interest (considering the current 10-year Verizon bond), but the stock also has price appreciation potential the bond does not have (if held to maturity).
The company’s recent earnings topped Wall Street estimates. Wireless subscriber additions topped expectations. Verizon is focusing on generating growth in service revenue, free cash flow, and earnings.
The company’s consumer wireless business has yet to get a material revenue lift from 5G smartphone users, but that is likely to occur. Verizon added 384,000 5G broadband subscribers, about the same as in the June quarter.
Verizon’s 5G network now is available to 200 million people in the US and is growing. It expects 5G business services using private network links to gain momentum in 2024. And, of course, there’s AI. Verizon says it plans to use artificial intelligence technology to improve customer service and lower operating expenses. This income stock offers potential growth, too.
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