Verizon’s Dividend Looks Secure But Investors Should Keep an Eye on Growth

Verizon Communications Inc. has maintained a strong dividend track record for 20 years, with a current yield of around 6%, placing it among the higher-yielding large-cap dividend stocks. In January, the company raised its quarterly dividend to $0.7075 per share, resulting in an annualized payout of $2.83, or a yield of approximately 5.9%. The dividend growth has been modest, with the latest increase of 2.5% aligning with the company's recent history of modest increases.

The primary question for investors is whether Verizon is generating enough cash to sustain its dividend. In 2025, the company generated $20.1 billion in free cash flow, while paying out approximately $11.5 billion in dividends. Free cash flow has further improved in 2026, with $10.2 billion generated in the first half of the year, a 16% increase from the same period in 2025.

Management expects free cash flow to grow by 9%-10% in 2026. The adjusted earnings per share are forecasted to be between $4.99 and $5.04, making the dividend payout approximately 56% of expected adjusted EPS, which is not an alarming payout ratio for a mature telecom company.

Verizon's competitive advantage lies in its nationwide wireless network and fiber infrastructure, which are extremely difficult and costly to replicate. Although the company has a significant amount of debt, its high cash flow generation provides comfort that the dividend can continue to be supported. Verizon also benefits from its strong customer base, network infrastructure, spectrum holdings, and established brand.

The company's acquisition of Frontier has increased its fiber footprint, and fixed wireless offers another avenue to compete for broadband customers. However, Verizon's balance sheet is heavily leveraged, and the company aims to reduce leverage to 2.0-2.25 times adjusted EBITDA by 2027.

Verizon's growth expectations for 2026 are modest, with mobility and broadband service revenue growth of only 2.5%-3%. This limited growth potential makes it challenging to see the dividend increase at a much faster pace. Nonetheless, Verizon's dividend story is straightforward: a high yield, 20 consecutive years of dividend increases, and sufficient free cash flow to support the payout.

The stock is an attractive option for investors seeking current income, with the added benefit of a long dividend history and a strong competitive position in the industry.