It didn't take long for Verizon Communications (VZ 0.17%) to move past its embarrassing service outage two weeks ago. All it took was for the telecom giant to hit a home run with its 2025 full-year and fourth-quarter results.
Verizon's shares soared after the company provided its Q4 update on Friday morning. And if you love Verizon's forward dividend yield of 6.4%, you'll especially like what management had to say. Verizon just gave income investors three new reasons to be optimistic.
NYSE: VZ
Key Data Points
1. Robust free cash flow growth
When it comes to paying dividends, free cash flow is king. Verizon reported free cash flow of $20.1 billion in 2025, up from $19.8 billion in the previous year.
However, that wasn't the best news. Verizon's guidance projects the company's free cash flow will grow by at least 7% year over year on 2026 to $21.5 billion. If the telecom leader achieves this goal, it would be the highest free cash flow that Verizon has generated since 2020.
2. Accelerating earnings
Many income investors rely on dividend payout ratios as the primary metric for evaluating the safety of a dividend. Verizon already enjoys a healthy payout ratio of 58%, but it's probably about to get even more attractive.
Dividend payout ratios are calculated by dividing the total dividends paid by earnings (either on an aggregate or per-share basis). The higher the earnings, the lower the payout ratio -- and the safer the dividend usually will be.
Image source: Verizon Communications.
Verizon projects adjusted earnings per share (EPS) of between $4.90 and $4.95 in 2026. This range reflects year-over-year growth of 4% to 5%. This growth also represents what the company called "a significant acceleration compared to recent historical performance."
3. An improving underlying business
Generating robust free cash flow and increasing earnings is only possible when a company's underlying business is strong. Perhaps the best news for income investors is that Verizon's underlying business is improving noticeably.
CEO Dan Shulman said in the Q4 update, "Verizon is at a critical inflection point." He believes the company is at "the beginning of our turnaround." The numbers appear to back up his enthusiasm.
Verizon posted its highest quarterly postpaid phone net additions since 2019. Wireless services revenue rose 1.1% to $21 billion in Q4. Wireless equipment revenue jumped 9.1% year over year to $8.2 billion. The company further deleveraged its balance sheet, with net unsecured debt declining to $110.1 billion at the end of Q4 2025 from $113.7 billion at the end of the prior year period.
The closing of the acquisition of Frontier Communications on Jan. 20, 2026, is also a major positive milestone. Schulman called the finalization of the transaction "another pivotal step in our turnaround, significantly scaling our fiber footprint to over 30 million homes and businesses."
