7 Point Verizon Dividend 2019 Guide (*Expert Analysis*)

I was born during the Eisenhower era, when media consisted of distinct entities: AM radio, studio-produced movies, “the phone company,” and black-and-white television.

TV sets came with only three channels. But when I was a kid, we were lucky to get any channel. (Sometimes we covered the rabbit ear antennas with tin foil to get better reception.)

And in today’s digital era? Every human desire, every whim, every conceivable entertainment/news/data option are fiber-optically connected for instantaneous gratification, around-the-clock and around-the-world in high definition.

Competition has become so fierce in the media/telecom sector, once solid blue chips are getting hammered by technology disruptors that are adept at monetizing media “convergence.”

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Will global communications company Verizon (NYSE: VZ) survive the onslaught? Verizon is a dividend champ, prized by income investors. The stock also confers significant growth potential. But breakthrough technologies continually threaten to knock the company off its perch.

With a market cap of $235.1 billion, Verizon provides wireless telecommunications and a host of entertainment products worldwide. Under the Fios brand name, the company offers Internet, television, and data services.

Verizon is known for consistently healthy investments in new technologies, as underscored by its emphasis on the transition from 4G to ultra-fast 5G.

The company’s wireline segment offers traditional circuit-based network products and services. Headquartered in New York City, this telecom giant boasts 116.3 million retail connections.

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Verizon traces its origins to the 2000 merger of Bell Atlantic and GTE Corp. By subscriber count, Verizon Wireless is the nation’s largest wireless communications service provider with more than 150 million wholesale and retail subscribers. That’s a lot of users — and user data — for the company to leverage.

With smartphone penetration now at a high level, other gadgets with cellular connectivity are providing the next leg of growth for telecoms like Verizon. But history shows that today’s dominant corporations can wind up on tomorrow’s scrap heap.

Let’s see if dividend payer Verizon can stay in the vanguard of income stocks.

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Does Verizon Pay Dividends?

Yes. Dividends are distributions of company earnings to shareholders. They’re a “reward” to people who hang on to the company stock. Typically, dividends are approved by the board of directors. Shareholders also have a say.

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Dividends are paid from quarterly profits. The amount of profit left over after the distribution of dividends is classified as retained earnings.

If you own a stock that pays dividends, you’ll receive those dividends as cash payments deposited directly to your brokerage account.

What Is Verizon’s Dividend?

The annualized payout is $2.41, paid quarterly.

Dividends are paid from quarterly profits. The amount of profit left over after the distribution of dividends is classified as retained earnings.

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If you own a stock that pays dividends, you’ll receive those dividends as cash payments deposited directly to your brokerage account.

What Is Verizon’s Dividend History?

Verizon’s dividend has grown for the past 12 years. The dividend grew in 2018, as this chart shows (source: Verizon investor presentation).

Verizon boasts a history of giving investors 2%-3% dividend increases annually. Dividend growth reflects a strong balance sheet; it also protects buying power from the corrosive effects of inflation. Over the past five years, VZ’s annualized dividend growth rate comes to roughly 2.7%.

What Is Verizon’s Dividend Yield?

Verizon’s dividend yield is 4.26%, considerably higher than the current average dividend yield of 1.93% for the S&P 500.

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A dividend yield is simply a company’s annualized dividend payment divided by the company’s current share price.

Dividend Yield = Annual Dividend Per Share / Current Price Per Share

The dividend yield is one of the most important considerations for income-oriented investors because it represents the amount of cash flow they will be receiving in return for their investment. Generally, the higher the dividend yield, the higher the return on the investment.

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When Is Verizon’s Dividend Payout Date(s)?

The next schedule payout dates in 2019 are May 1, August 1, and November 1. The last payout date was January 9.

Will Verizon’s Dividend Increase In 2019?

Verizon has a long history of increasing dividends; it may do so again this year.

This video provides a “deep dive” into the strength and safety of Verizon’s dividend.

We’re a long way from the days when AT&T (NYSE: T), aka Ma Bell, held a monopoly on national phone service. All forms of media are now intertwined.

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Verizon’s $4.5 billion purchase of Yahoo, which closed in June 2017, followed the telecom’s initial foray into the digital media space with its $4.4 billion purchase of AOL in June 2015.

Verizon combined the Yahoo and AOL platforms to create its Oath subsidiary, a diverse portfolio of more than 50 media and technology brands. But the new entity has under-performed management’s expectations. Verizon recently took a $4.6 billion write-off on Oath and intends to rebrand the division as Verizon Media Group.

Verizon’s misstep with Oath is yet another reminder that it’s difficult for legacy telecoms to branch out into media content. Just ask rival AT&T, which continues to struggle with the massive debt that it accumulated from buying Time Warner.

Read This Story: Our AT&T Stock Prediction In 2019 (Buy or Sell?)

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However, Verizon continues to beef-up its telecom business by launching 5G technology. The firm also is expanding its fiber optics network. The company has been making massive investments in its wireless and wireline networks over the past few years, to the tune of about $4 billion a quarter.

The company is wisely re-focusing on technology as opposed to content, a long-term strategic repositioning that should pay off for the company. Verizon’s core telecom business remains the gold standard in the industry.

Another factor boosting demand for Verizon’s wireless services is the rise of the Internet of Things (IoT).

IoT refers to how everyday objects — from industrial machines to utility meters to wearable devices — use built-in sensors to gather data, communicate, and take action.

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Will Verizon’s Dividend Be Cut In 2019?

That’s highly unlikely.

When investing in dividend-paying stocks, investors need to be mindful of the trade-off between risk and reward. If a company suddenly can’t generate enough cash flow to support its dividend, it may cut the dividend or get rid of it altogether.

When judging the merits of a dividend stock, always look for 1) healthy payout ratios; 2) plenty of cash on hand; and 3) earnings growth. These quality dividend payers demonstrate greater resilience during an environment of rising rates and market volatility.

So how does Verizon stack up?

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For starters, the payout ratio is a robust 51.7%.

The payout ratio reflects how much of a company’s net income is devoted to dividend payments. For example, if the company in a quarter generated earnings per share of $1.00 and paid a dividend of 60 cents per share, the payout ratio would equal 60%.

Healthy businesses generate large amounts of cash flow and earnings. For a dividend to be sustainable, the amount paid out to investors must be well covered by the amount of cash coming into the business. How well the dividend is covered by actual cash is measured by the payout ratio.

Payout Ratio = Dividends Per Share / Earnings Per Share

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Verizon’s annual free cash flow for 2018 was $17.6 billion, a 150% increase from 2017. The company’s annual free cash flow for 2017 was $7 billion, a 52.7% increase from 2016. It’s from free cash flow that dividends are paid. Verizon also holds $2.7 billion in total cash (most recent quarter).

Earnings growth is in the cards as well. The average analyst expectation is for Verizon to rack up five-year earnings growth of 9.4%, on an annualized basis.

My verdict: Verizon is a superb income play. The likelihood of meaningful capital appreciation is icing on the cake. What’s more, institutional investors have been bullish on Verizon over the last 13F reporting cycle, with 18 of the company’s 30 largest stakeholders adding positions. Follow the smart money.

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John Persinos is the managing editor of Investing Daily.