By Mark Bern, CPA CFA
Verizon (VZ) has been a great company for many in many ways. Management made great moves when the industry was consolidating; they have developed the largest wireless system in the U.S.; when the company takes on a project it has usually over-achieved its original stated goals. And it pays a nice dividend! At the current price (at the close on Friday, December 09, 2011) of $38.43 the $2.00 annual dividend yields 5.2 percent.
During the third quarter, VZ added 882,000 new wireless subscribers, increased smartphone accounts to 39 percent from 36 percent in the previous quarter, and increased revenues generated by their FiOS fiber-optic services to 60 percent for consumer wire-line customers from 50 percent in the previous year. Each was an improvement. Taken together it supports the expectation of future growth in revenues and hopes for further improvement to earnings as well as dividend increases.
Another recent achievement involves the rollout of the 4G mobile broadband network. The company is ahead of schedule and has already made the service available to 186 million people. This number already exceeds the company’s original goal of 185 million by year end, 2011. The year doesn’t end on September 30th, so the final 2011 tally will be even better.
The stock has traded in a fairly tight range lately and isn’t likely to make any major moves anytime in the near future. I don’t expect dividends to rise by much each year, but I do expect increases in the two percent per year range. The question I ask myself is whether I would rather have a lower yield with a higher rate of increase or the higher dividend at the start. Since I’m retired, I like the higher dividend, but in this case I chose AT&T (T) for my portfolio. I also own Vodafone (VOD) for the yield in this relatively stable industry. But if I didn’t own those two I would definitely consider Verizon.
If readers are interested in articles on some of the other telecom companies with great dividends (some by myself and some by other authors) you’ll find them at the following links:here, here, here, here, and here.
Here is an opposing view on Verizon.