Why This 7% Yielding Dow Stock Is a Must-Buy in 2025

In the ever-changing landscape of the stock market, finding reliable income sources can be a challenge. However, one blue-chip stock that has recently caught the attention of income-focused investors is Verizon (VZ). Despite a 7% decline in its stock price year-to-date in 2025, Verizon's high dividend yield makes it an attractive investment opportunity. Let's delve into the factors contributing to this decline and why Verizon remains a no-brainer buy for dividend investors.

Understanding the Decline

Verizon's stock price has decreased from $39.99 on December 31, 2024, to $38.94 on January 10, 2025, resulting in a 7% decline. This drop can be attributed to several factors, including a slight increase in its dividend yield from 6.78% to 6.96% during the same period. While this increase in yield might seem counterintuitive, it is a result of the stock price decline, making the dividend payout relatively higher.



Comparing to Peers and Historical Yields

To put Verizon's current dividend yield into perspective, let's compare it to its historical yields and those of its peers. As of January 10, 2025, Verizon's dividend yield stands at 6.96%, which is higher than its historical yield of 6.78% on December 31, 2024. When compared to its peers, Verizon's yield is significantly higher. For instance, Chevron (CVX) has a yield of 4.34%, Amgen (AMGN) 3.60%, Johnson & Johnson (JNJ) 3.49%, Merck (MRK) 3.24%, and Coca-Cola (KO) 3.14%.



Why Verizon Is a No-Brainer Buy

1. High Dividend Yield: Verizon's current dividend yield of 6.96% is one of the highest among blue-chip stocks, making it an attractive option for income-focused investors. This high yield provides a steady stream of passive income, which is particularly valuable in volatile markets.

2. Sustainability of Dividends: Verizon has a strong track record of paying and increasing its dividends. The company's robust financial health and consistent cash flow generation suggest that it can continue to sustain its dividend payments even during economic downturns.

3. Market Conditions: In the current economic environment, characterized by high inflation and changing interest rates, dividend-paying stocks like Verizon can provide a hedge against inflation. This makes Verizon an appealing investment for those looking to protect their portfolios from market volatility.

4. Diversification Benefits: Adding Verizon to your portfolio can provide diversification benefits, as it operates in the telecommunications sector, which is relatively stable compared to other sectors. This stability can help mitigate risks associated with more volatile investments.

Red Flags to Watch

While Verizon's high dividend yield and strong financial health make it an attractive investment, there are a few red flags to watch out for:

1. Payout Ratio: Verizon's payout ratio should be closely monitored to ensure that the company can sustain its dividend payments. A high payout ratio could indicate that the dividend is at risk if the company's earnings decline.

2. Economic Downturns: Although Verizon has a strong track record, economic downturns can impact the company's performance and its ability to pay dividends. Investors should be prepared for potential fluctuations in dividend payments during economic downturns.

3. Competition: The telecommunications sector is highly competitive, and Verizon faces competition from other major players. Investors should keep an eye on the company's competitive position and its ability to maintain market share.

Conclusion

Verizon's 7% decline in stock price year-to-date in 2025 presents a unique opportunity for income-focused investors. With a high dividend yield of 6.96%, strong financial health, and sustainability of dividends, Verizon is a no-brainer buy for those looking to generate passive income. However, investors should also consider the potential risks and red flags associated with this investment. By carefully evaluating these factors, investors can make an informed decision and potentially benefit from Verizon's attractive dividend yield.