Top Dividend Stock #2: Verizon (VZ)
Dividend Yield: 4.55%
YTD Performance: -5.17%
52-Week Return: -13.11%
Shares of Verizon (NYSE:VZ) have struggled recently, but the company continues to pay out a hefty quarterly dividend of 53 cents, keeping VZ firmly in the second-place spot in the list of highest-yielding Dow dividend stocks. Corrections come and go, but Verizon has been steadily growing its annual payout for the last seven years, and the company has made some key moves lately that should grab investors’ attention.
About a month after completing the deal to retake Vodafone’s (NASDAQ:VOD) stake in Verizon Wireless, for which the company raised a record-high $49 billion in bonds, Verizon announced a debt offer to raise another $4.5 billion, which it intends to use to repurchase five tranches of company debt. Like the Vodafone deal, this move should help boost Verizon’s bottom line. And in fact, EPS did enjoy a year-over-year gain in the first quarter, from 68 cents to 84 cents in non-GAAP earnings. VZ stock took a hit on that news, though, because analysts’ consensus forecast was for EPS of 87 cents.
However, a closer look at the earnings release reveals some good news for Verizon Wireless. Service revenues gained 7.5% year-over-year for the wireless segment, and since the buyback deal with Vodafone just closed on Feb. 21, that figure only includes five weeks’ worth of full results.
The company’s wireless segment gained 539,000 net retail postpaid customers for the quarter. Interestingly, the increase came not from cell phone customers, but from tablet users and even home phone users. As Verizon works on upgrading its landline network, more and more home phones are now connecting to the wireless network, which may account for the decrease in landline users. It’s a brave new world for telecom, and investors who buy VZ now can benefit from the continued shift while earning a steady 4.55% on their money.