Verizon: A High-Yield Dividend Buy for 2026?

In the quest for reliable income-generating investments, telecom giant Verizon Communications (VZ) has emerged as a compelling candidate for 2026. With a dividend yield of 6.82% as of December 2025 and a payout ratio of 58%, the company's financial health and strategic focus on debt reduction and free cash flow generation suggest its dividend is well-positioned for sustainability. Coupled with a valuation that appears undervalued relative to historical metrics, Verizon's profile warrants serious consideration for income-focused investors.

Dividend Sustainability: A Track Record of Resilience

Verizon's dividend yield, currently among the highest in the S&P 500, is supported by a payout ratio of 58%, which remains comfortably below its 10-year median of 51% and historical highs of 68%. This indicates the company has ample capacity to maintain or even increase its dividend without overextending its cash flow. For context, the firm's free cash flow for the first half of 2025 reached $8.8 billion, up from $8.5 billion in the same period in 2024, prompting management to raise full-year guidance to $19.5–$20.5 billion. Such robust cash flow generation, combined with a 19-year streak of consecutive dividend increases, underscores the durability of its payout.

Analysts project the dividend yield to rise to 7.0% in 2026, driven by a combination of share repurchases and earnings growth. Notably, Verizon's recent declaration of a $0.69 per share quarterly dividend-unchanged from the prior quarter-signals confidence in its ability to sustain this level while pursuing strategic initiatives like 5G expansion and IoT innovation. While the Q4 2025 earnings report, scheduled for January 30, 2026, may provide further clarity, the company's focus on cost-cutting and asset monetization suggests dividend stability is unlikely to be compromised.

Valuation Attractiveness: Undervalued Metrics and Strong Credit Profile

Verizon's valuation metrics paint a picture of a company trading at a discount relative to its fundamentals. Its trailing price-to-earnings (P/E) ratio of 8.58 is significantly lower than its 2024 peak of 17.82 and sits well below the S&P 500's average P/E of 20–25. Meanwhile, the price-to-book (P/B) ratio of 1.61 reflects a market perception of modest growth but strong asset value according to analysis. These metrics suggest Verizon is undervalued, particularly for a company with its scale and cash flow consistency.

Credit ratings further reinforce this narrative. Fitch affirmed an "A-" rating for Verizon's new senior unsecured notes in October 2025, citing its "large scale, diversified operations, and strong free cash flow generation." Similarly, Moody's reaffirmed a "Baa1" rating in August 2025, highlighting the company's ability to manage debt amid a challenging macroeconomic environment. S&P's recent assignment of a "BBB+" rating to a proposed senior note underscores confidence in Verizon's ability to meet obligations. Collectively, these ratings indicate a low-risk profile, which is critical for a high-yield stock.

Strategic Tailwinds and Risks to Consider

Verizon's long-term growth is anchored in its 5G and IoT investments, which are expected to drive incremental revenue streams. The company's debt reduction efforts-evidenced by a net unsecured debt-to-adjusted EBITDA ratio of 2.3x and a decline in total unsecured debt to $119.7 billion in Q3 2025-also position it to capitalize on these opportunities without overleveraging. However, investors should monitor the Q4 2025 earnings report for updates on capital expenditure efficiency and subscriber growth, as these will influence 2026 guidance.

Conclusion: A Compelling Case for 2026

For investors seeking a high-yield stock with a strong balance sheet and a history of dividend growth, Verizon presents a compelling case. Its 6.82% yield, supported by a sustainable payout ratio and robust free cash flow, offers immediate income potential. Meanwhile, its undervalued valuation and top-tier credit ratings suggest the stock is poised for appreciation. While macroeconomic risks and sector-specific challenges persist, Verizon's strategic focus on innovation and debt management positions it as a resilient long-term holding. As the Q4 2025 results approach, the market will likely reward those who act now to secure this "dog of the Dow" at a favorable entry point.