Verizon Raised Its Dividend Again. What the "Highest Yield" Headline Doesn't Tell You

You don't usually get the highest yield in the S&P 500 and a still-growing dividend from the same stock. Usually it's one or the other: a yield that got fat because the price fell, or a smaller payout that quietly climbs every year. So when a headline tells you the index's top yielder "just raised its dividend again," the right next question is not "which stock?" but "which kind of yield is this?"

Right now the stock that actually sits at the top of the S&P 500's forward-yield list is Conagra Brands, paying roughly 9%. That number did not come from a growing payout. Its $1.40 annual dividend has stayed flat, and the yield simply looks big because the shares fell more than 30% over the past year. That is yield as a warning sign — a lesson in what a headline yield does not tell you.

Verizon is the other kind, and it is the cleaner test of the idea. Its yield of roughly 5.6% is far from the index's biggest — a few names pay more — but it is one of the S&P 500's largest cash dividends in dollar terms, and it keeps raising. The board bumped the quarterly payout to 70.75 cents in 2026, extending what the company counts as its 20th straight year of dividend increases. A yield you can rebuild from growth, rather than one inflated by a falling price, is the version an income portfolio can actually plan around.

The question, then, is whether that raise is truly earned — whether the cash flow coming in covers the cash going out. On that score, Verizon looks solid for now. It generated about $20.2 billion of free cash flow over the trailing year, and its annual dividend of roughly $2.83 a share needs only a bit more than half of that. On adjusted earnings, management's 2026 guidance of $4.99 to $5.04 a share puts the payout ratio near 56%, and the CFO has called the dividend "ironclad". Second-quarter adjusted EPS of $1.30 edged out the consensus estimate. The income engine is producing more than it pays.

The part of the story that needs watching is not the payout — it's the balance sheet behind it. Verizon bought regional fiber-wireline operator Frontier in 2025, and the acquisition pushed total debt to about $172.5 billion. That lifted leverage to roughly 2.5 times EBITDA, above management's own 2027 target range. Leverage alone rarely breaks a regulated-style utility dividend, but it changes the math: at 2.5 times EBITDA, the company has less room to keep paying down debt and buying back stock while still defending the payout through any downturn. The raise is comfortable today because cash flow comfortably covers it; the reason to check back is that the roominess of that coverage now depends on how fast the debt comes down.

Read through the numbers and the picture is a healthy income stream carrying a growing debt load — not a failing payout. For an income portfolio, that is a specific job worth filling. A 5.6% payout that grows each year, paid by free cash flow rather than borrowed money, can fund a portion of retirement spending without forcing you to sell shares to make it. It sits alongside a diversified set of holdings on purpose: no single dividend should be the whole plan, and Verizon is a reasonable piece of that architecture, not the whole machine.

The condition that would change the case is if free cash flow stopped growing while interest costs kept climbing — then a ~56% payout ratio would creep toward the uncomfortably high end and "ironclad" would start meaning less. That is not where the company is today. But it is exactly why the headline "highest yield" tells you so little, and the cash flow tells you so much. Watch whether the leverage comes down, and add or hold on the strength of the income, not the screen color.