Dividend stocks can be a great way to invest. Furthermore, building and regularly adding to dividend-paying stocks can generate passive income for retirement.
So let's have a look at two stocks with attractive dividend yields: AT&T (T -1.21%) and Verizon (VZ -4.67%).
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Verizon
Verizon's stock has recently fallen on hard times. In fact, shares are down 34% over the last three years, as investors have turned away from the telecom giant.
Nevertheless, Verizon is a financial giant that operates one of the largest mobile networks in the world. The company boasts over 140 million wireless subscribers, providing a stable stream of revenue and cash flow.
Verizon is a leader in the 5G field, and its large customer base and dependable network make it a compelling stock pick. After all, 5G will be vital for future innovations such as autonomous vehicles and Internet-of-Things technology.
At any rate, Verizon's financials should have value investors licking their lips. The company's price-to-earnings (P/E) ratio is a scant 7.3. That's far below Verizon's five-year average of 11.2, and among its lowest P/E ratio dating back to 2019.
VZ PE Ratio data by YCharts.
Similarly, its fat dividend yield of 6.8% should catch the eye of income-oriented investors. Verizon's yield is more than four times what you'll get from owning an S&P 500 ETF like the SPDR S&P 500 Trust.
But owning shares of Verizon isn't without risk. The company has over $186 billion in debt. And with interest rates having climbed in recent years, that debt load could weigh on Verizon -- and its ability to pay its hefty dividend.
AT&T
On the face of it, AT&T looks like a company on the decline. It's saddled with lots of debt, some $156 billion of it, and revenue has fallen more than 28% in the last two years. There are, however, reasons for value-oriented investors to find something to love in AT&T.
First, its dividend -- though recently reduced -- remains enticing. AT&T pays $1.11 per share annually. That makes for a 6.3% dividend yield.
Second, the company's recent moves to lower costs are starting to pay off. Total expenses have come down 37% from their all-time high, and they're now at their lowest level since 2014. Moreover, after years of steady increases, AT&T's net debt is declining. Net debt fell to $137 billion this year following the spinoff of its WarnerMedia assets to Warner Bros. Discovery in 2022.
T Net Financial Debt (Quarterly) data by YCharts.
Third, the company's massive client network remains its greatest asset. AT&T has over 200 million customers using its wireless and broadband services. As it continues expanding and improving its network, AT&T hopes to grow its wireless and broadband revenue between 4% and 5%.
There are also reasons for caution. AT&T cut its dividend by 47% last year. With a significant amount of debt still on its balance sheet, another cut is not out of the question.
Income-oriented investors should tread carefully with AT&T and remain vigilant that its management properly handles its balance sheet.
