AT&T vs. Verizon: Which Telecom Giant Offers the Better Dividend Play?
126min read The telecom sector has long been a haven for income investors, and few companies offer more in dividends than AT&T (T) and verizon (VZ). Both giants are staples in the S&P 500, but their dividend strategies diverge sharply. With AT&T’s yield at 4.09% and Verizon’s at a robust 6.14% as of early 2025, the question is clear: Which stock delivers a safer, more sustainable dividend?
Dividend Yield: Verizon’s Immediate Edge
Verizon’s 6.14% yield towers over AT&T’s 4.09%, making it the clear winner for investors seeking immediate income. Analysts project Verizon’s yield to rise further to 6.4% within three years, fueled by its disciplined capital allocation strategy. However, yield alone isn’t enough. A high payout ratio or stagnant growth can undermine even the most appealing dividend.
Payout Ratios: A Warning for AT&T
Verizon’s 64% payout ratio (Q1 2025) is a stark contrast to AT&T’s 74.97%, which exceeds the 60% threshold many analysts view as sustainable. Verizon’s lower ratio reflects stronger earnings coverage—its Q1 2025 adjusted EPS of $1.19 comfortably supports the dividend. AT&T, by contrast, has leaned heavily on earnings, with a payout ratio now approaching 75%. This raises concerns about its ability to grow dividends without straining its finances.
Dividend Growth: Verizon’s Consistency Shines
AT&T’s dividend growth has stalled. Its trailing 12-month growth is 0%, and over three years, it has declined by -18.89%. Verizon, meanwhile, has increased its dividend for 20 consecutive years, with a 2.32% annualized growth rate over the past decade. Even in early 2025, Verizon edged out a 1.49% quarterly increase, pushing its dividend to $0.68 per share. While modest, this consistency is critical for long-term income investors.
Cash Flow and Debt: Verizon’s Stronger Foundation
Both companies generate ample free cash flow, but Verizon’s discipline stands out:
- Verizon: Q1 2025 free cash flow hit $3.6 billion (up 33% year-over-year), with net debt-to-EBITDA at a manageable 2.3x.
- AT&T: While its free cash flow rose to $3.1 billion, its net debt-to-EBITDA target of 2.5x leaves less room for error.
Verizon’s stronger cash flow and lower leverage provide a buffer against economic headwinds, reducing the risk of dividend cuts. AT&T’s reliance on high payout ratios makes it more vulnerable.
The Verdict: Verizon’s Balanced Appeal
Verizon’s 6.14% yield, 64% payout ratio, and 20 years of dividend growth position it as the safer, more sustainable dividend play. AT&T’s higher payout ratio and stagnant growth—even with its 4.09% yield—make it riskier.
Conclusion: Prioritize Sustainability Over Immediate Yield
For income investors, Verizon’s blend of high yield, manageable payout ratio, and proven dividend growth makes it the superior choice. While AT&T’s 4.09% yield might tempt, its overextended payout ratio and lack of growth raise red flags. Verizon’s $3.6 billion in free cash flow and 2.3x net debt-to-EBITDA ratio reinforce its ability to sustain payouts even as it invests in 5G and fiber networks.
In a sector where dividends are king, Verizon’s 6.4% yield projection and 20-year dividend growth streak underscore its dominance. AT&T, meanwhile, risks falling behind unless it can reignite earnings growth or reduce its payout ratio. For now, Verizon remains the telecom dividend stalwart.
Invest wisely.
