Verizon CommunicationsNYSE: VZ

The dividend stock yields 6.6% -- but is it too risky?

Verizon's earnings report for the third quarter caused its stock price to drop, creating a chance to buy, even though there may not be much growth in the short term because of the Frontier Communications deal. The market reacted strongly due to higher debt and lower revenue than expected, but Verizon's dividend is still secure with a low payout ratio of 46.7%. This low payout ratio makes Verizon a good option for income investors, even with recent drops in earnings and cash flow.

Verizon's financial results are still poor, even after increasing its dividend, as revenues fell by 0.1% in Q3'24 and earnings per share dropped to $1.19. The company has invested a lot in capital expenditures, 5G spectrum, and acquisitions, but this has not led to increased revenue. Although the stock offers a high dividend yield of 6.55%, the company's high debt and limited growth opportunities present serious risks for investors.

The stock offers a appealing yield of 6.5%.

The large telecommunications company seems well-prepared to continue its record of 18 straight dividend increases.

VZ is still a strong Buy because its dividend yields have become more attractive after the market reacted too strongly to the FQ3'24 results. The company's main wireless services are doing well, showing steady profit margins and rising average revenue per account as myPlan gains traction. VZ's updated future predictions and higher consensus estimates suggest ongoing growth in both revenue and profits, reinforcing its position as a reliable dividend investment.

Verizon's stock has stabilized positively after a low point in 2023, but it is still lagging behind the S&P 500 this year, indicating possible gains through mean reversion strategies. The earnings report was mixed: while earnings per share exceeded expectations, they fell compared to last year, and revenue was below estimates, with a notable drop in net income due to competition and changes in operations. Although there is strong growth in wireless subscribers, high-interest rates are affecting equipment sales, and the guidance for 2025 suggests higher capital spending along with modest growth in EBITDA and revenue.

One expert thinks the company will face some tough challenges ahead.

Brandon Nispel, an analyst at Keybanc Capital Markets, has changed his rating for Verizon Communications Inc VZ stock from Overweight to Sector Weight.