For investors looking for substantial dividend income, there's always a careful line to balance. If you blindly reach for high dividend yields, you might be left with a portfolio full of poorly performing companies. After all, if a dividend yield is abnormally high, it is usually because something is wrong with a company and its stock price has been beaten down. On the other hand, if you ignore dividend yield and just look for high-quality companies, you may build a portfolio that doesn't generate sufficient income for your financial goals.
From time to time, however, there are stocks with high dividend yields that are also high-quality companies. These are typically companies that are out of favor for one reason or another, yet their underlying businesses remain solid, at least when evaluated against their conservative valuations.
Verizon (VZ 0.10%), I believe, sits in this rare sweet spot of providing investors a high dividend yield alongside the stability of a solid business. The company boasts a lucrative recurring revenue stream that generates significant free cash flow to cover its high dividend payments.
Here's a closer look at why Verizon is my top high-yield dividend stock to buy in January.
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A closer look at Verizon's impressive dividend
With a quarterly dividend of $0.69, Verizon pays out $2.76 per year in dividends, giving the stock an impressive 6.9% dividend yield at its current price.
Further, the company's dividend has been growing, albeit at a modest pace. The company announced a dividend increase of 1.25 cents per share in September. Notably, this was Verizon's 19th consecutive annual increase.
The dividend hike "is a direct result of the company's disciplined financial management and unwavering focus on long-term growth," management said in the company's press release when it announced its dividend increase.
But is this dividend sustainable? I think so. The company paid out about $11.4 billion in dividends over the trailing 12 months. Meanwhile, Verizon's trailing-12-month free cash flow, or its cash flow generated from regular operations less capital expenditures, came in at just over $21.1 billion. In other words, Verizon is paying out only 54% of its free cash flow in dividends. And its payout ratio (dividends as a percent of a company's earnings) comes in at a similar level: 58%.
Business growth is slow, but that's OK
Sure, Verizon's underlying business isn't spectacular. In fact, it's arguably a bit boring. Verizon's third-quarter 2025 revenue rose just 1.5% year over year to $33.8 billion. A key driver of this growth was a 2.1% year-over-year increase in wireless service revenue. Highlighting the segment's importance to the overall business, total third-quarter wireless service revenue reached $21.0 billion.
NYSE: VZ
Key Data Points
While these results may not get investors on the edge of their seats, they are impressive in the context of the stock's valuation. Shares currently trade at about 8.6 times earnings and about 1.2 times sales. A valuation like this essentially assumes the status quo remains unchanged. Any growth beyond the anemic growth Verizon is putting up today, therefore, would just be icing on the cake.
Further, the recurring nature of Verizon's business model is impressive. The company's consumer wireless retail postpaid churn was just 1.12% in the third quarter of 2025, and wireless retail postpaid phone churn was only 0.91%. Business stability like this helps explain why the dividend looks sustainable.
Of course, there are risks for Verizon. The wireless network business has always been intensely competitive -- so much so that consumers largely choose their carriers based on price. Even more, carriers constantly compete on subsidies for new phones and by bundling deals for services like streaming TV, streaming music, and other digital services. If Verizon begins to lose its edge and churn creeps higher, investors may need to revisit the durability of Verizon's business and question whether its recurring nature is as reliable as investors think.
Additionally, Verizon carries a lot of debt on its balance sheet. Total unsecured debt at the end of its third quarter was 5.9 times its net income over the trailing 12 months, and its net unsecured debt was 2.2 times its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). This leverage could help the company see outsize earnings growth when things are going well, but it could be a major headwind if Verizon's business begins to decline
Even when considering these risks, I believe Verizon stock looks attractive. After all, its cheap valuation helps price in these risks. The stock is probably a good option for investors looking to boost their portfolio's income with a reasonably safe, high-yield dividend stock.
