Verizon Communications Inc. (NYSE: VZ) has announced a quarterly dividend increase, marking the 18th consecutive year of dividend growth for the stock. On Sept. 4, the company’s Board of Directors declared a dividend of 67.75 cents per share, up 1.25 cents from the previous quarter, which amounts to increase of just under 2%.
With the increase, the stock is now paying investors $2.71 per share over the course of a full year. That puts its yield at around 6.5%, which is significantly higher than the S&P 500 average of 1.3%. You would need to invest approximately $15,200 into the telecom stock to collect $1,000 in annual dividends whereas it would take around $77,000 with the average S&P 500 stock.
While Verizon does make for a compelling dividend stock given its high yield, it has, unfortunately, delivered underwhelming returns. Over the past five years, the stock has fallen by around 30%. The good news for investors, however, is that as interest rates come down and bonds and other investments become less attractive, Verizon’s stock could generate a lot more interest and start to rally due to its high yield.
Due to its underwhelming returns, the stock is modestly valued, trading at just nine times its expected future profits and just 1.3 times its trailing revenue. As long as you aren’t expecting massive gains, the stock could make for an excellent addition to your portfolio, provided that you’re willing to hang on for the long haul as the stock’s routine dividend increases make it a great income stock to hold for years.
