In its long-running quest to keep shareholders sweet, telecom giant Verizon Communications (VZ -0.28%) declared a dividend raise in early September. Those investors might not have liked the taste of the new payout, though, as the company's share price has fallen by nearly 8% since then.

By comparison, the S&P 500 index has dipped by less than 2%, archrival AT&T's stock has slipped only 1%, and competitor T-Mobile US is up by more than 4%. So does this indicate that, even with the dividend raise, Verizon has fallen into value territory for bargain-hunting investors?

That's one expensive phone call

In trumpeting that dividend raise, Verizon didn't hesitate to mention that it makes 2023 the 17th consecutive year the company enacted a hike. This, it says, gives it the longest current raise streak in the American telecom sector.

Perhaps the company is highlighting those facts because the lift isn't particularly generous. It's adding barely over $0.01 to its quarterly payout for a new tally of just under $0.67 per share. Put in percentage terms, that's a dividend raise of -- get ready for it -- not quite 2%. The new distribution is to be handed out on Nov. 1 to investors of record as of Oct. 10.

Verizon is in somewhat of a pickle. As a massive telecom services provider, it's not finding it easy to grow in a world where nearly everyone of means has a smartphone and a broadband internet connection wired up at home.

And those smartphone owners are increasingly expecting good access when they're out and about with their devices. Stitching the country together with a network based on the current (5G) wireless technology is hard and expensive work. Ditto for the fiber optic networks that are the current tech of choice for high-speed broadband.

As stable as much of Verizon's business is, it requires vast and constant capital expenditures to maintain the company's big customer base. Even with its heavy cash flow the telecom can't do it alone -- it has to borrow stacks of money to stay operational.

And this is the Achilles' heel of Verizon (plus AT&T and T-Mobile, to lesser extents). Verizon's long-term debt stood at a staggering total of nearly $159 billion at the end of its most recently reported quarter. That's down slightly from the two previous end-quarter tallies, but still notably above recent amounts (like the $141 billion at the end of 2020). 

Servicing this debt is costing the company upward of $1.2 billion every quarter these days. While that wide user base provides plenty of the green stuff -- revenue topped $32.5 billion in Q2, for instance -- $1.2 billion is a hefty amount that isn't making it all the way to the bottom line (which came in at $4.6 billion in said quarter).

One problem with this in this age of inflation is that interest rates have risen sharply since the thick of the coronavirus pandemic, and might just be pushed upward again. At the end of 2022, more than 30% of Verizon's debt securities had maturities of five years or less. Many of these are sure to be refinanced, and the higher rates will add to the already considerable debt burden and servicing obligations.

Roping in newbies and keeping investors happy

Many investors are aware of this aspect of Verizon's operations, which is one reason the stock has underperformed lately. Yet the company is a fighter, and management has been effective at not only maintaining that big customer base, but expanding it -- in its latest reported quarter wireless user additions weren't massive but the total did grow, while there was healthy improvement in the number of broadband "adds."

In other words, for an industry incumbent Verizon is admirably energetic and obviously willingly doing the grunt work needed to secure and expand its business. This is commendable for a business of its size and position.

Also, that payout is looking awfully appealing these days. Verizon has been in high-yield dividend territory for a while, with a distribution that tops 8.5%. That's better than a great many blue chip stocks, including good old AT&T with its 7.7%. T-Mobile US very recently started paying a dividend, which yields a mere 1.8%. 

Given all that, I think that while some aspects of Verizon's operations warrant concern, it's a solid company that's a fine dividend stock play for investors.