Verizon Communications (VZ): A Steady 6% Dividend Yield in a Volatile Market?

Verizon Communications (VZ), one of the U.S.’s largest telecom giants, has long been a stalwart for income-focused investors. With a dividend yield hovering around 6.5% as of early 2024—and forecasts suggesting it could remain elevated through 2025—Verizon offers a compelling combination of stability and income. But is its high yield sustainable, and does the stock deserve a place in your portfolio? Let’s dig into the data.

The Dividend: A 20-Year Streak, But Growth Has Slowed

Verizon’s dividend history is a testament to its reliability. The company has increased its payout for 20 consecutive years, a feat that places it among the S&P 500’s “Dividend Aristocrats.” As of April 2024, Verizon’s annual dividend stood at $2.66 per share, yielding roughly 6.5% at a share price of $41.35.

However, recent growth has stalled. The quarterly dividend has remained flat at $0.665 per share since May 2024, and even the April 2025 forecast hints at only a minor uptick to $0.678. This reflects a broader trend: Verizon’s annualized dividend growth rate has slowed to just 1.92% over the past year, down from 2.32% over the last decade. While the dividend remains secure, income investors should temper expectations for rapid growth.

Financial Health: High Payout Ratio, But Cash Flow Is Strong

Verizon’s dividend is supported by its stable cash flows, driven by its dominant position in U.S. wireless and broadband markets. However, the company’s payout ratio—97.97%—is alarmingly high, meaning nearly all earnings are funneled to shareholders. A payout ratio above 100% could eventually strain sustainability, but Verizon’s dividend cover ratio of 2.0 (earnings per share divided by dividends per share) suggests a buffer for now.

The telecom sector is capital-intensive, requiring ongoing investment in 5G infrastructure. Verizon’s ability to maintain this payout ratio hinges on its ability to grow earnings or manage costs. Recent moves, such as shedding its media division (Verizon Media Group) and focusing on core telecom services, aim to improve margins and reduce debt.

Stock Price Volatility: A Double-Edged Sword for Yield

Verizon’s dividend yield is inversely tied to its stock price. When shares rise, the yield falls, and vice versa. For example, in October 2023, the stock dipped below $35, pushing the yield to a 52-week high of 12.3%. Conversely, at its April 2024 closing price of $41.35, the yield dropped to 6.5%.

Investors should note that Verizon’s stock has historically been resilient during ex-dividend events, with minimal long-term price drops. The April 10, 2025, ex-dividend date saw shares dip slightly to $42.92 but rebound within days, underscoring investor confidence in its underlying business.

The Risks: Can the Yield Stay Above 5%?

While Verizon’s dividend is secure in the short term, risks lurk:
1. Earnings Pressure: A slowdown in wireless subscriptions or broadband growth could squeeze profits.
2. Debt Levels: Verizon carries $64 billion in debt, which must be managed amid rising interest rates.
3. Regulatory Headwinds: Telecom regulations could limit pricing power or force asset sales.

Yet, Verizon’s fortress balance sheet and $10 billion in free cash flow annually provide a cushion. The company has also prioritized debt reduction, lowering its leverage ratio over the past two years.

Conclusion: A High-Yield Anchor for Defensive Portfolios

Verizon Communications remains a solid choice for income investors seeking a dividend yield above 5% in a low-interest-rate environment. Its 20-year growth streak, stable cash flows, and fortress balance sheet justify its reliability. However, the 98% payout ratio is a cautionary note: earnings stagnation or a spike in costs could threaten future hikes.

For now, the math works: at $41.35 per share, a $2.66 dividend equates to a 6.5% yield—a compelling reward for investors willing to accept modest growth. Pair this with Verizon’s defensive sector exposure and you’ve got a stock that could thrive in economic downturns.

While not a “growth rocket,” Verizon is a high-yield anchor for portfolios—so long as you’re prepared to monitor its financial metrics closely.

This analysis is based on historical data and does not constitute financial advice. Always consult with a professional before making investment decisions.