Often, companies with high, sustainable cash flow are generous dividend payers. That's indisputably the case with telecom sector incumbent Verizon (VZ +0.02%), which has a massive base of regular customers providing a thick and steady stream of greenbacks.
With this pile, Verizon pays a high-yield dividend that has attracted more than a few investors to the stock. Let's pick the payout apart.
Say hello to a high-yield dividend
Verizon dispenses its payout once every quarter. The current disbursement is just under $0.67 per share, for a yield of 6.6%.
The company has a habit of raising it once per year, albeit incrementally. Its recent annual bumps have all been barely over $0.01 per share, and those raises tend to occur late in the year.
Because of that, we don't yet have a fix on what Verizon's total shareholder payout will be for the entirety of 2024. Management likely will declare yet another one of those tiny dividend raises.
If we're generous and assume a per-share hike approaching $0.02 (which would kick in with the two remaining payouts between now and the end of the year), Verizon's total annual dividend per share would add up to roughly $2.72 per share.
NYSE: VZ
Key Data Points
Is it sustainable?
It's admirable that management's been able to keep the payout on the rise, no matter how incrementally. This is because it operates in a tough business. Competition is heavy, customer churn is always a threat, and those nationwide networks are expensive to build, operate, and maintain.
That's why Verizon, like other big telecoms, is deeply in debt. Although long-term borrowings have come down in recent years, they still totaled nearly $158 billion at the end of 2023. That wasn't quite double the company's equity, but it wasn't far away, either.
Regardless, Verizon's dividend feels sustainable. Free cash flow approached $19 billion for all of 2023, while dividend payouts sat a little above $11 billion.
This high-yield dividend has that magic combination of being both safe and attractive. This alone makes its issuer worthy of consideration as a buy.
