Shareholders of U.S. telecommunications giant Verizon Communications (VZ) have had a tough year. Typically a defensive stock that isn't too volatile, Verizon's down 40% from its high and has fallen more than the S&P 500 in 2022. The company pays a juicy dividend that yields 7% at today's share price, a tempting prize for retirees and dividend investors.

So what gives? I'll dive into Verizon's struggles  to determine whether investors should be worried about Verizon's dividend checks clearing anytime soon. Ultimately, buying the stock is a decision that could come down to your situation.

Falling behind the competition

The telecommunications industry in the U.S. is an oligopoly, which means that a tiny group of companies dominate the market. In this case, Verizon, AT&T, and T-Mobile US serve most wireless users. You can compare the companies to see how well they're doing against each other. Most consumers in America have cellphones and hop between carriers over time.

You can trace Verizon's slumping share price to its struggles with subscriber growth throughout this year. After nine months, Verizon lost 16,000 wireless subscribers this year. So where did they go? Over to the competition. AT&T added 1.7 million net subscribers over the same time frame, and T-Mobile added 1.1 million. AT&T and T-Mobile are adding more than Verizon lost, so it's not all at Verizon's expense. However, it's clear that people aren't choosing Verizon, whether they're switching from a discount carrier or one of the big three, or are just a new cellphone user.

Wireless networks are price competitive, so subscriber growth is notable in driving revenue growth. Verizon's stalling in subscriber additions could foreshadow weak growth down the line and is probably at least a reason why the stock has fallen out of favor on Wall Street.

About that dividend

Verizon isn't a rapidly growing company to begin with, but it generates gobs of cash profits that fund a generous dividend. The hyper-yield, currently at 7%, is a big reason many investors own shares. Verizon has raised that dividend for 18 consecutive years and seems poised to continue becoming a Dividend Aristocrat.

You can see below that even in a year where operating profits are down year to date from $31.2 billion to $28.2 billion and increased capital spending has further reduced free cash flow, Verizon still has $4.3 billion in cash left after paying the dividend.

Verizon Q3 2022 Cash Flow Summary

Data source: Verizon Communications Q3 earnings presentation. 

Investors should watch to see if free cash flow continues dropping in the quarters ahead, but it seems that the dividend faces no danger at present. So you can sleep pretty well at night having the stock's 7% yield in your portfolio.

Is it time to buy?

Whether Verizon is a buy today depends on your situation. For example, investors looking to maximize income on their investments can buy Verizon for its well-funded dividend. But it's a more challenging question if you're looking for total returns, which include a rising share price. Verizon is trading at a price-to-earnings ratio (P/E) of just 8, well below its typical valuation over the past decade (P/E of 13).

That would leave room for solid investment returns if the market's sentiment toward Verizon increased and pushed the valuation. However, it's hard to see that happening without the company's subscriber growth getting back on track first. If you're trying to put your money into the best total return opportunity, there might be better options in a market where everything is selling off.