Verizon's 6% Yield Is Worth Holding for Years

Verizon Communications saw its shares drop by nearly 9% on October 9, 2022, following SpaceX's acquisition of nationwide spectrum, which could lead to the possibility of a Starlink mobile service. However, the company's latest quarterly report presented a robust business model, supported by a dividend yielding over 6%. Verizon's annual dividend payment of $0.7075 per share, or $2.83 per year, provides a yield of approximately 6.5% at a stock price of around $43.50 per share as of October 26, 2022.

Verizon has increased its dividend payout for 20 consecutive years, showcasing the company's commitment to rewarding shareholders. In the third quarter, free cash flow surged by 12% to $7.8 billion, and management raised its full-year growth forecast to nearly 12%. Dividend payments accounted for about 58% of free cash flow over the past year, ensuring the sustainability of the dividend even in a year with weaker results.

CFO Tony Skiadas affirmed Verizon's dedication to growing the dividend, emphasizing the company's focus on acquiring customers through revenue-positive terms rather than promotional offers. CEO Dan Schulman highlighted Verizon's Simplicity plan, loyalty program, and phone-plus-home-internet bundles, which foster a loyal customer base that remains with the carrier instead of switching to a competitor.

Verizon added a net 406,000 customers on monthly phone plans, representing an 820% increase compared to the previous year. Moreover, the number of customers leaving the company each month is decreasing. Even if SpaceX launches its own service, it won't control the entire market, as the wireless carrier industry already boasts substantial competition.

Established leaders such as AT&T and Verizon enjoy a strong retail presence, offering in-person customer service that is challenging to replace. Given the company's strong cash flow, which covers the dividend and encourages longer customer retention, Verizon remains an attractive long-term income investment.