Despite the concerns around lead-covered cables and a slowing economy, telecom giant Verizon Communications (NYSE:VZ) still raised its dividend last week. On Sept. 7, the company announced that it would be increasing its quarterly dividend by 1.25 cents, with the payout now up to 66.50 cents. This represents a modest 2% increase to the dividend. It also extends Verizon’s dividend streak to 17 consecutive years.
CEO Hans Vestberg stated in the press release that, “Our consistently disciplined approach to driving strong cash flow, operating the business, and serving our customers has once again put the Board in a position to raise the dividend.”
The new dividend will pay investors $2.66 per share on an annual basis, putting its already high yield now at 7.9%. At this high of a payout, investors would need to invest less than $12,700 into the stock to collect $1,000 in annual dividends. That’s far less than with the average stock on the S&P 500 where the yield is around 1.5%. To earn $1,000 in dividends at that rate, you would need to invest more than $66,000.
Shares of Verizon are down 15% this year as investors have become bearish on the business and telecom in general, amid rising interest rates and the potential liabilities some companies like Verizon may have with respect to cleaning up lead-covered cables.
But with the stock trading at less than seven times earnings, it is deeply discounted and provides a good margin of safety for concerned investors. Combined with its high yield, this can make for an excellent investment to buy and hold right now.
