Please ensure Javascript is enabled for purposes of website accessibility

Verizon's 4.3% Dividend Yield Is Safe as 2021 Gets Underway

By Nicholas Rossolillo - Jan 28, 2021 at 9:06AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Verizon's best days of growth are behind it, but this is a solid dividend stock if that's what you're after.

Shares of Verizon Communications (VZ 1.31%) are kicking off 2021 with a whimper. The company's revenue increased 0.2% year over year in the fourth quarter of 2020 to $34.7 billion, and earnings per share declined 10% to $1.11. America's largest mobile network is treading water, and other communications services -- including rival T-Mobile (TMUS 2.27%), which was first to market with nationwide 5G -- are making fast headway during the pandemic. 

But for investors looking for investment income, Verizon stock's current 4.3% dividend yield remains a solid pick.  

Don't expect much excitement in 2021

Considering the world was cast into chaos in the last year, Verizon's financial results from 2020 are respectable. Overall, revenue and earnings were stable, underscoring the staple that mobile connectivity has become among consumers and businesses alike. Along the way, Verizon spent $18.2 billion in capital expenditures, including on upgrades in support of its new 5G network.  


Full-Year 2020

Full-Year 2019



$128 billion

$132 billion


Earnings per share




Free cash flow

$23.6 billion

$17.8 billion


Data source: Verizon Communications.  

In spite of pedestrian results, the company did report another increase in net connections. There were 357,000 consumer and 346,000 business wireless postpaid net additions in Q4, and 95,000 total net Fios Internet additions -- the highest rate of growth for Fios since 2014 as high-speed internet at home is prioritized by households. The growth rates are being outpaced by T-Mobile (which has yet to report on Q4 as of this writing but added 1.98 million wireless postpaid net additions in the third quarter), but for now, Verizon is still in the lead as the largest telecom in the U.S.

Four people standing against a wall using smartphones.

Image source: Getty Images.

Though it was the last to roll out nationwide 5G, mobility researcher RootMetrics recently reported Verizon's network is still on average the fastest and most reliable network in the U.S., well ahead of AT&T (T 2.17%) and T-Mobile. T-Mobile is quickly closing the gap, though, and has far less debt. That would give the smaller (for now) and scrappy network an advantage as it touts its lower-cost and fast-improving service to lure in subscribers. Verizon, for its part, ended 2020 with nearly $119 billion in unsecured debt -- an increase of $19.3 billion from a year ago.  

Business is stable, but don't expect a big rally in the year ahead as Verizon laps initial effects from the pandemic. Its outlook for 2021 calls for about a 2% year over year increase in total revenue, and a 2% to 5% increase in earnings per share (when adjusted for one-time special items).  

A well-funded dividend payout, but not much more

The real story here, though, is Verizon's free cash flow (revenue minus cash operating expenses and capital expenditures). As 5G expands and businesses especially find new use cases for next-gen mobility, Verizon has been able to squeeze extra profitability out of its network. Free cash flow generated grew nearly 33% from 2019 to $23.6 billion, giving the company plenty of room to service its sizable burden of indebtedness, increase capital expenditures in support of 5G upgrades if necessary (it expects another $17.5 billion to $18.5 billion in capex in 2021), and pay its dividend.  

Specifically, the current dividend payout cost Verizon $10.2 billion last year. At less than half of free cash flow, the shareholder payout is handily covered and has room to grow over time. For investors looking for growth, T-Mobile -- or better yet, a cloud-based software communications service -- is a better bet. The growing burden of debt could give Verizon some headaches down the road if it limits the company's ability to keep up with ever-shifting business trends, but it's nonetheless still worth owning at this juncture for investors looking to generate some stable income.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$50.18 (1.31%) $0.65
T-Mobile US, Inc. Stock Quote
T-Mobile US, Inc.
$128.90 (2.27%) $2.85
AT&T Inc. Stock Quote
AT&T Inc.
$20.84 (2.17%) $0.44

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.