Tags: verizon | dividend | yield | megacap | stock

Buy This Mega-Cap Stock for Secure 4.3 Percent Dividend Yield

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Thursday, 03 January 2019 03:21 PM Current | Bio | Archive

Investors should always remember that investing in stocks carries risks. The elevated volatility and poor performance of the S&P 500 in 2018 is a reminder that stocks can, and do, go down.

As a result, investors might want to focus on safer stocks for 2019. Mega-cap stocks, which have market capitalizations of $200 billion or more, have established brands and highly profitable business models. This allows them to pay steady dividends to shareholders.

Telecom giant Verizon Communications (VZ) has one of the highest dividend yields of all mega-cap stocks at 4.3%, and offers investors a secure dividend payout with reliable growth.

Verizon: Cash Flow Machine

Verizon Communications is the largest telecommunications company in the U.S., with a market capitalization above $230 billion. Verizon’s massive business is led by its flagship service Verizon Wireless, the largest wireless service provider in the U.S.

In 2014, Verizon acquired the remaining 45% stake in Verizon Wireless from European telecom Vodafone. This gave Verizon full control of a booming business. Wireless service revenue growth continues to accelerate, including in the most recent quarter. Revenue grew 2.8% to $32.6 billion, while earnings per share jumped 24% from the same quarter last year. Verizon’s strong performance was due heavily to the wireless business. Net subscriber growth reached 295,000 last quarter, while wireless revenue increased by 6%.

Verizon’s massive and highly profitable wireless segment provides the company with huge amounts of cash flow. Verizon generated over $25 billion in cash flow from operations in 2017, and over $26 billion of cash flow from operations over the first three quarters of 2018. This gives Verizon the ability to pay its hefty dividend to shareholders.

Verizon should have little trouble continuing to increase its dividend going forward, thanks to the company’s impressive growth catalysts. First, the impending rollout of 5G networks across the U.S. will enable Verizon’s growth. Verizon expects to unveil 5G service in the first half of 2019. Verizon’s $3.1 billion acquisition of Straight Path Communications has given it a lead in 5G spectrum.

Another growth catalyst for Verizon is the Internet of Things, or IoT, which will bring connectivity to a new wave of products, far outside the realm of smartphones. Verizon’s IoT business generated 12% revenue growth in the most recent quarter.

Dialing Up Dependable Dividends

Verizon rewards shareholders with a high dividend yield of 4.3%. And, Verizon’s dividend is highly secure. The company is expected to have a dividend payout ratio of just over 50% for 2018, a healthy distribution level that secures the current payout, while leaving room for future dividend increases. Verizon has raised its dividend for the past 12 years, placing it on the list of Dividend Achievers.

A healthy balance sheet also helps secure Verizon’s dividend. The company has a high level of interest coverage, and a credit rating of BBB+ from Standard & Poor’s and Baa1 from Moody’s, the two major U.S. credit ratings agencies.

With a positive growth outlook, secure dividend, and a high 4.3% yield, Verizon is among the top mega-cap stocks for income investors to buy today.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.

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As a result, investors might want to focus on safer stocks for 2019. Mega-cap stocks, which have market capitalizations of $200 billion or more, have established brands and highly profitable business models. This allows them to pay steady dividends to shareholders.
verizon, dividend, yield, megacap, stock
538
2019-21-03
Thursday, 03 January 2019 03:21 PM
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