Dividend aristocrats like Coca-Cola, Cardinal Health, Chevron Corp, and others have long proven to be favorite stock picks for long-term investment strategies. In addition to the three dividend aristocrats already mentioned, Verizon Communications (VZ) has long ranked among the highest and most reliable dividend-paying stocks around.
While VZ’s price per share has remained relatively unchanged over the last two decades, its dividend has continually increased over the last 15 years. VZ’s strong dividend performance makes it an attractive long-term investment that even attracted Warren Buffett’s interest.
While Verizon Communications has historically performed quite well as a dividend-paying stock, can it really guarantee its shareholders 5% per year?
Verizon Has 142 Million Customers
At the end of Q4 2021, American multinational telecommunications conglomerate Verizon Communications reported revenue of $133.6 billion, an operating income of $32.5 billion, and a net income of $22.6 billion.
The company operates through two main segments:
- The Verizon Consumer Group and
- The Verizon Business Group.
The Consumer Group segment is centered around consumer-focused wireless and wireline communications services and products. In addition, Verizon Communications is the parent company of the wireless carrier company Verizon.
At the end of Q4 2021, Verizon was the largest wireless carrier in the United States, with over 142 million subscribers. The Business Group segment is centered around providing wireless and wireline communications and services, corporate networking solutions, and security and managed network services.
What Makes Verizon Stock a Top Dividend Stock?
It’s clear that VZ is a great dividend-performing stock, but can it guarantee 5% per year?
While nothing is guaranteed when it comes to investing, investing in VZ stock might just prove to be the easiest 5% dividend yield you may ever come by as an investor.
These are two most prominent factors that make VZ stock such a reliable dividend stock with the potential to continuously provide investors with a 5% return below.
1. Dominant Market Position / Oligopoly
One of the two main factors that help to ensure that Verizon Communications will be able to continually provide its shareholders with a 5% dividend yield is that the company is among a small group of companies that hold complete control of the telecommunications industry throughout the United States.
In the 21st century, phone and internet bills have become household necessities, and Verizon serves as the provider for many households across the nation. Ultimately, this necessity status means that Verizon Communications will thrive in almost all economic situations.
2. Verizon Communications Has Strong Financials That Support Its Steady Dividend Payments
The second significant factor that points to Verizon Communications’s ability to continually provide its shareholders with a 5% dividend yield is that the company has an extremely strong financial system to support a steady dividend.
Verizon has historically spent less than half of its profits on dividends, meaning that the company easily affords its quarterly dividend payments throughout each year.
Does VZ Stock Have What It Takes to Guarantee 5% Per Year?
During the Verizon Communications Inc. Q4 2021 Earnings Call, the Chairmen and CEO of Verizon Communications, Hans Vestberg, outlined the success the company found in 2021 saying,
“We have never executed so well on so many strategic and operational objectives as we did in 2021. This was a catalyst year for Verizon, and I’m very proud of our work. We have a clear and disciplined strategy based on our multipurpose network that creates economies of scale and new business models in an era where broadband is essential to our customers and society.”
Vestberg continued by explaining how the progress made in 2021 is what will allow VZ to flourish throughout 2022, saying, “Our results clearly confirm that our strategy is working and that 2021 was a transformative year for Verizon, and it clearly sets us up for a high-impact year in 2022. We have now assembled the industry’s most comprehensive portfolio of high-quality assets, leveraging our best-in-class technology to extend our network leadership to address more opportunities than anyone else in the market.”
Vestberg hammered home the fact that VZ stock is an investment that has already proven its long-term value, stating, “Verizon leads the industry in sustainability. We have ranked ahead of our peers, both by the Drucker Institute and Just 100, and we are confident that our multi-stakeholder strategy will lead to long-term shareholder value.”
Is Verizon Stock a Buy, Sell, or Hold?
Over 140 million customer rely on Verizon daily and are unlikely to give up their cell phone service long into the future, if ever. That leads to a predictable revenue stream that places Verizon firmly on the Hold list.
With its stock hovering in the low $50s and its current annual dividend and yield sitting around $2.56 per share or 4.88%, Verizon is ideally suited to income-oriented investors looking for a predictable yield that will stand the test of time.
So, if you’re looking for a stock that will continually provide a yield of around 5% annually, then Verizon Communications stock should be a key holding in your investment portfolio.
Verizon Stats At a Glance
- The company’s market cap is currently around $220 billion.
- Its stock’s 52-week low is $49.69, and its 52-week high is $59.85.
- The company is a corporate component of the Dow Jones Industrial Average, a price-weighted measurement stock market index of 30 prominent companies listed on U.S. stock exchanges
- Its initial public offering or IPO occurred on July 3, 2000. At this time, Verizon Communications began trading for around $45 per share under the stock ticker VZ.
ps: What Are Dividend Paying Stocks?
Dividend stocks are simply stocks that make regular distributions to their shareholders. These distributions are usually in the form of cash payments. Investing in dividend stocks has historically proven to be a successful method to build wealth over the long term. For investors, dividend stocks provide a number of benefits, including reduced risk, a predictable income, and profit through stocks without having to sell.
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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.