On a downbeat Tuesday for U.S. stocks, Verizon, a leading telecom company, saw its shares climb significantly, advancing by 2.75%. Investors were drawn to the stock amid speculation that Verizon might soon increase its already substantial dividend. This enthusiasm propelled its share price nearly 3% higher, even as the S&P 500 index suffered a decline of over 2%.
Analysts predict imminent dividend hike
Earlier that day, analysts from the prestigious investment bank Morgan Stanley suggested that Verizon is on the verge of announcing a dividend increase. They projected that this announcement could come as soon as Thursday, September 5. Morgan Stanley expects a $0.05-per-share annual boost to Verizon’s quarterly common stock dividend, potentially raising the next distribution to almost $0.68 per share.
Should this prediction come to pass, the increase would align with Verizon’s pattern of dividend hikes in recent years. While the company routinely raises its payouts annually, these increments are generally modest. The most recent quarterly increase, declared last September, was slightly over $0.01 per share.
Verizon, known for its effective and highly profitable telecom services, attracts many investors due to its attractive shareholder distributions. The company offers a generous dividend yield of nearly 6.3%, a rate that would remain unchanged with a $0.05 annual increment.
The company’s financial capability
Verizon enjoys robust cash flow, supported by a vast base of subscribers who consistently pay for its services. This financial strength allows the company to sustain its high dividend payouts. Currently, Verizon’s cash dividend payout ratio is below 80%, indicating that the distribution is well-supported and sustainable, provided no unforeseen disasters impact the company.
