Stock Analysis

Verizon Communications Inc. (NYSE:VZ) Should Be In Your Dividend Portfolio, Here's Why

  •  Updated
NYSE:VZ
Source: Shutterstock

Verizon Communications Inc. (NYSE:VZ) is a true Dividend Rock Star. Its yield of 4.1% makes it one of the market's top dividend payer. In the past ten years, Verizon Communications has also grown its dividend from $1.84 to $2.41. Below, I have outlined more attractive dividend aspects for Verizon Communications for income investors who may be interested in new dividend stocks for their portfolio.

See our latest analysis for Verizon Communications

What Is A Dividend Rock Star?

It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:

  • It is paying an annual yield above 75% of dividend payers
  • It has paid dividend every year without dramatically reducing payout in the past
  • Its has increased its dividend per share amount over the past
  • It can afford to pay the current rate of dividends from its earnings
  • It has the ability to keep paying its dividends going forward

High Yield And Dependable

Verizon Communications's dividend yield stands at 4.1%, which is on the low-side for Telecom stocks. But the real reason Verizon Communications stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you're investor who wants a robust cash inflow from your portfolio over a long period of time.

NYSE:VZ Historical Dividend Yield, September 3rd 2019
NYSE:VZ Historical Dividend Yield, September 3rd 2019

If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. In the case of VZ it has increased its DPS from $1.84 to $2.41 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes VZ a true dividend rockstar.

The current trailing twelve-month payout ratio for the stock is 63%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 52% which, assuming the share price stays the same, leads to a dividend yield of around 4.3%. However, EPS should increase to $4.72, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

Next Steps:

Verizon Communications's strong dividend attributes make it, without a doubt, a stock dividend investors should be considering for their portfolios. However, given this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental aspects you should look at:

  1. Future Outlook: What are well-informed industry analysts predicting for VZ’s future growth? Take a look at our free research report of analyst consensus for VZ’s outlook.
  2. Valuation: What is VZ worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether VZ is currently mispriced by the market.
  3. Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

About NYSE:VZ

Verizon Communications

Verizon Communications Inc., through its subsidiaries, offers communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation5
Future Growth1
Past Performance1
Financial Health3
Dividends5

Read more about these checks in the individual report sections or in our analysis model.

Undervalued established dividend payer.

Similar Companies