Verizon's Big Turnabout on Verizon Wireless Dividend

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Verizon (NYSE: VZ  ) caught everyone off guard when it announced that Verizon Wireless, the venture it shares with U.K.-based telecom Vodafone (NASDAQ: VOD  ) , would be paying out $7 billion to its two partners.

Based on Verizon's 55% share and Vodafone's 45% share, the companies would receive $3.85 billion and $3.15 billion, respectively. The dividend will be disbursed on June 25, 2013.

The surprising thing about this payout is not that Verizon Wireless wasn't expected to be making a profit -- it's that previous remarks made by Verizon CEO Lowell McAdam to analysts at J.P. Morgan suggested that because of the desire to pay down Verizon Wireless' $5 billion in debt, the partners should not expect much return form their investments this year.

It was considered then that with the threat of leaner payouts perhaps McAdam wanted to put a bit more pressure on Vodafone to sell its share of Verizon Wireless to Verizon. There had been reports last month from both Reuters and Bloomberg that Verizon was preparing an offer of $100 billion for Vodafone's share but that Vodafone valued it at $130 billion.

But Verizon CFO Fran Shammo told an audience at a J. P. Morgan technology conference that McAdam's comments had been misunderstood. What McAdam said, according to Shammo, was that the dividend would be smaller than in the past.

From 2005 until 2012, Verizon had withheld paying out dividends from the profitable Verizon Wireless. In 2012, the piggy bank finally opened and Vodafone received $8 billion.

Verizon Wireless is, as one disappointed Vodafone investor has said, the best thing in the last 10 years of Vodafone's "collection of modest success and abject failures."

Shammo said his company would pay a dividend if there is nothing else that is needed to be done with it.

A fresh idea for 2013
The Motley Fool's chief investment officer has selected his No. 1 stock for the year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2430411, ~/Articles/ArticleHandler.aspx, 10/1/2016 4:52:21 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 19 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 4:00 PM
VOD $29.15 Up +0.03 +0.10%
Vodafone CAPS Rating: ****
VZ $51.98 Down -0.14 -0.27%
Verizon Communicat… CAPS Rating: ****