Current Dividend Yield: 4.6%
Performance So Far in 2013: +3%
Verizon is the leading wireless telecom provider in the U.S. by subscriptions and gets 50% of its revenue from wireless subscribers. Plus, it’s also a top-tier high-speed Internet provider — an ever-important role as the country continues to hurtle through the digital revolution. And that absolute necessity for wireless service — and its huge market share amid a dearth of competitors – means a very stable revenue stream that helps fund its big, fat dividend.
It was that fat dividend that helped propel Verizon through most of 2012, as income was all the rage. While VZ’s 7%-plus gains last year don’t sound that grand, it’s icing on the cake for a stock traditionally expected to reward investors on the dividend, not through rip-roaring share appreciation.
A big source of downward pressure for Verizon is that the country is more or less at wireless saturation, meaning VZ is in a hotly contested battle to both retain its current customers and wrest contracts from its competitors. And of course, even gaining those subscribers can result in a big hit thanks to big subsidies on smartphones, which happened to Verizon in Q4. Thanks to huge iPhone sales, VZ recorded profits of just 45 cents per share that came in a nickel short of estimates.
Still, that’s because 2.1 million monthly contract users signed on, which is a long-term good for VZ. Plus, the company also has its FiOS TV business, as well Redbox Instant, a streaming video service it just launched with its partner, Coinstar (NASDAQ:CSTR).
Meanwhile, the headliner act — its dividend — has grown 20% in five years and yields well north of 4%.