Verizon Communications' (NYSE:VZ) Shareholders Will Receive A Bigger Dividend Than Last Year

Verizon Communications Inc. (NYSE:VZ) will increase its dividend on the 1st of November to $0.665, which is 1.9% higher than last year's payment from the same period of $0.653. Based on this payment, the dividend yield for the company will be 7.8%, which is fairly typical for the industry.

View our latest analysis for Verizon Communications

Verizon Communications' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite comfortably covered by Verizon Communications' earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

EPS is set to fall by 0.3% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 54%, which is comfortable for the company to continue in the future.

Verizon Communications Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $2.06 in 2013 to the most recent total annual payment of $2.61. This works out to be a compound annual growth rate (CAGR) of approximately 2.4% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though Verizon Communications' EPS has declined at around 7.9% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Verizon Communications' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Verizon Communications' payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Verizon Communications has been making. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Verizon Communications that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.