Top Dividend Stock #2: Verizon (VZ)
Dividend Yield: 4.52%
YTD Performance: -4.54%
52-Week Return: -4.31%
Once again, Verizon (VZ) has taken the second place spot on our list of top Dow dividend stocks. Although its dividend yield is not as high as that of AT&T (T), VZ has almost doubled the performance of its biggest competitor in terms of capital appreciation over the last five years (60% versus 34% for T stock).
One reason for that performance is that the company has been able to steadily grow its wireless business. Verizon Wireless, which is now owned in full by parent Verizon Communications after it acquired Vodafone’s (VOD) 45% stake in a deal worth approximately $130 billion last month, outpaced the revenue growth of AT&T’s wireless segment in the latest quarter.
It has been estimated that the acquisition could help to increase VZ’s future earnings by about 10%, which in turn could boost the company’s payout ratio. The current quarterly dividend sits at 53 cents per share, requiring VZ to pay out $1.48 billion to shareholders, but with average quarterly free cash flow coming in at more than $3.8 billion, the company has more than enough to cover an increased payout.
VZ has upped its dividend by about 1.4% annually over the last five years, but as earnings increase, dividend payouts should get a boost as well. Trading about 13.5% below its 52-week high of $54.31, VZ carries a P/E ratio of 11.6 — an enticing number to value investors looking to add this high-yielder to their portfolios.