By Walgreens Boots Alliance recently made headlines by announcing a significant cut to its dividend, causing a considerable drop in its stock value. As a result, Verizon Communications now stands as the company with the most generous dividend payout in the Dow Jones Industrial Average.
Walgreens’ Dividend Cut
Walgreens has decided to reduce its dividend payout from 48 cents per share to just a quarter per share. Unsurprisingly, this news sent the company’s shares tumbling by 7.5% to $23.67. It’s worth noting that this decline marks the largest one-day percentage decrease since April 2019. Unfortunately, this move comes after a year where the stock has already lost about 35% of its value.
The Importance of Dividend Yields
For investors interested in dividend stocks, the relative dividend yield is a crucial factor to consider. A high dividend yield indicates financial confidence on the part of the company, as it demonstrates a commitment to regular cash payouts. It also provides investors with an opportunity to earn consistent returns.
The Risk of Extraordinarily High Dividend Yields
While high dividend yields are generally seen as positive, there can be cause for concern when yields become unusually high. This often occurs as a result of significant declines in stock prices. Unfortunately, as demonstrated by Walgreens and several other companies, such high yields are often unsustainable in the long term.
Verizon Takes the Lead
Currently, Verizon holds the highest dividend yield among Dow Jones Industrial Average companies, with a yield of 6.74% as of late morning. Despite this distinction, Verizon’s dividend payout seems secure. In fact, the company recently raised its dividend in September, marking the 17th consecutive year of dividend increases. This impressive streak makes Verizon the longest-standing telecom company in terms of consistent dividend growth.
In conclusion, while Walgreens’ dividend cut raises concerns, Verizon stands as the new leader in dividend yields within the Dow Jones Industrial Average. As always, investors must carefully evaluate the sustainability and potential of high-yield dividends to make informed investment decisions.
Verizon’s Dividend Coverage and Commitment
In late October, Verizon’s CEO, Hans Erik Vestberg, reassured shareholders during the company’s earnings call by stating that Verizon’s “dividend coverage is very healthy.” Vestberg mentioned that their year-to-date free cash flow dividend payout ratio has improved to approximately 56%, signifying a significant enhancement from the previous year.
Verizon’s Chief Financial Officer, Anthony Skiadas, echoed this sentiment in mid-November when speaking at a Morgan Stanley conference. Skiadas emphasized that the dividend commitment remains one of Verizon’s top priorities when it comes to capital allocation. Proudly referring to the dividend raise that took place in September, Skiadas reassured investors that Verizon is “very pleased” with its continuous dividend growth.
Investors can take solace in knowing that Verizon is dedicated to its dividend payouts. However, it’s important to note that dividends are not the sole reason for owning Verizon stock.
Verizon: More Than Just Dividends
While Verizon has a generous dividend yield similar to AT&T, offering a yield of 6.45%, analysts highlight that there are other compelling reasons to invest in Verizon. In fact, the stock has already received two upgrades within the first three trading days of 2024.
Keybanc Capital Markets upgraded Verizon’s rating to Overweight, citing a positive outlook on the company’s growth potential for the year. Similarly, Wolfe Research raised its call to Outperform, emphasizing that Verizon’s shares are expected to benefit from decreasing leverage and increasing sales.
On Thursday, Verizon’s shares experienced a slight uptick of around 1%. Despite this recent gain, it’s important to note that the stock has faced a decline of nearly 4% over the past year.
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