U.S. Markets closed
  • S&P 500

    3,465.39
    +11.90 (+0.34%)
     
  • Dow 30

    28,335.57
    -28.09 (-0.10%)
     
  • Nasdaq

    11,548.28
    +42.28 (+0.37%)
     
  • Russell 2000

    1,640.50
    +10.25 (+0.63%)
     
  • Crude Oil

    39.78
    -0.86 (-2.12%)
     
  • Gold

    1,903.40
    -1.20 (-0.06%)
     
  • Silver

    24.70
    -0.01 (-0.04%)
     
  • EUR/USD

    1.1868
    +0.0042 (+0.3560%)
     
  • 10-Yr Bond

    0.8410
    -0.0070 (-0.83%)
     
  • Vix

    27.55
    -0.56 (-1.99%)
     
  • GBP/USD

    1.3038
    -0.0042 (-0.3207%)
     
  • USD/JPY

    104.7200
    -0.1200 (-0.1145%)
     
  • BTC-USD

    12,957.45
    -354.68 (-2.66%)
     
  • CMC Crypto 200

    260.05
    -1.40 (-0.54%)
     
  • FTSE 100

    5,860.28
    +74.63 (+1.29%)
     
  • Nikkei 225

    23,516.59
    +42.32 (+0.18%)
     

Be Sure To Check Out Verizon Communications Inc. (NYSE:VZ) Before It Goes Ex-Dividend

Simply Wall St
·4 mins read

Readers hoping to buy Verizon Communications Inc. (NYSE:VZ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 8th of October to receive the dividend, which will be paid on the 2nd of November.

Verizon Communications's next dividend payment will be US$0.63 per share, on the back of last year when the company paid a total of US$2.46 to shareholders. Looking at the last 12 months of distributions, Verizon Communications has a trailing yield of approximately 4.2% on its current stock price of $59.24. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Verizon Communications can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Verizon Communications

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Verizon Communications paid out 53% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 48% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Verizon Communications's earnings per share have risen 14% per annum over the last five years. Verizon Communications has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Verizon Communications has increased its dividend at approximately 2.6% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Should investors buy Verizon Communications for the upcoming dividend? Verizon Communications's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Verizon Communications for the dividends alone, you should always be mindful of the risks involved. For example - Verizon Communications has 1 warning sign we think you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.