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Home Dividend InvestingSafety Net Verizon’s Dividend Yield Isn’t as Safe as It
Used to Be


VERIZON’S DIVIDEND YIELD ISN’T AS SAFE AS IT USED TO BE


written by Marc Lichtenfeld Wednesday, May 3, 2023


Two years ago, I analyzed Verizon‘s (NYSE: VZ) dividend safety and rated it an
“A.” It was very safe.

But can we say the same today? Let’s have a look.

The most important metric that we look at here at Safety Net headquarters is
free cash flow. While Verizon has lots of it, it has been generating less and
less over the past few years.

This year, free cash flow is expected to rise to $16.9 billion from last year’s
$14 billion, which was the lowest since 2017. But you can see that since 2020,
the trend has been lower.



The Safety Net model penalizes companies for declining cash flow. It’s a
troubling sign.

Another important metric that we scrutinize is the payout ratio. This is the
percentage of free cash flow that is paid out in dividends.

I want to see the payout ratio be 75% or lower. In other words, I am not
comfortable with companies paying out more than 75% of their free cash flow to
shareholders. That’s because if cash flow slips, like we’re seeing with Verizon,
it makes it tougher to afford the dividend.

Last year, Verizon’s payout ratio was 77% – just above my 75% threshold. This
year, because free cash flow is forecast to rise, the payout ratio is projected
to be 66%, which is back within my comfort zone.

Verizon has raised its dividend every year for the past 16 years. Management
stated as recently as last week that dividend growth is its objective and it
expects to increase the payout again this year.

The company’s yield is impressive at 6.7%, and if management does what it says,
the yield will be even higher (based on today’s price).

So we have a company with an excellent track record, and if free cash flow comes
in close to where Wall Street expects, it should make the dividend very
affordable and safe.

But until it does, we have to go with the numbers that have actually been
reported, not what’s expected. And the numbers from the past few years aren’t
stellar, which means the dividend is no longer as rock-solid as it was two years
ago.

I won’t be surprised if next year at this time, Verizon’s dividend safety rating
has been upgraded. But until the 2023 numbers come in, the dividend isn’t as
safe as it once was.

Dividend Safety Rating: C


If you have a stock whose dividend safety you’d like me to analyze, leave the
ticker in the comments section.

Be sure to check out the Wealthy Retirement website to see whether I’ve written
about the dividend safety of your favorite stock recently. Just click on the
word “Search” in the upper right part of the page and type in the name of the
company.





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MARC LICHTENFELD



Marc Lichtenfeld has studied the markets for more than 22 years. After getting
his start on the trading desk at Carlin Equities, he moved over to Avalon
Research Group as a senior analyst. Marc was also a senior columnist at Jim
Cramer’s TheStreet.

Currently, Marc is the Chief Income Strategist at Wealthy Retirement and The
Oxford Club. He is an author, speaker and financial guru to 500,000 readers who
receive his publications each week.

His readers include teachers... engineers... sound technicians... real estate
investors... financial advisors... business developers... law enforcement
officers... people from all walks of life.

Marc’s mission is to help every one of them generate a safe and steady stream of
retirement income that never runs out.

Marc’s top-notch research makes him a sought-after media guest. He has appeared
on CNBC, Fox Business and Yahoo Finance. A few of his appearances are below…

If you want to feature Marc, please reach out on our contact page.




MARC IN THE MEDIA



Marc Lichtenfeld Talks About Gary Cohn’s Resignation
Outlet: Fox Business
Date: March 22, 2018
Category: Television
Description: Marc appears on Fox Business’ Mornings With Maria segment to
discuss Gary Cohn’s resignation.

Marc Lichtenfeld Discusses America’s Retirement Crisis
Outlet: Bloomberg Radio
Date: March 22, 2018
Category: Radio/Podcast
Description: Marc makes a guest appearance on Bloomberg Radio to discuss
America’s retirement crisis.

Click Here to See a Full List of Marc's Appearances




MARC LICHTENFELD BOOKS



Marc Lichtenfeld’s first book, Get Rich With Dividends: A Proven System for
Double-Digit Returns, achieved best-seller status after its release in 2012.
Since, the book has gone through 30 printing runs. And in 2016, the Institute
for Financial Literacy named it “Book of the Year.”

In early 2018, Marc released his second book, You Don’t Have to Drive an Uber in
Retirement: How to Maintain Your Lifestyle without Getting a Job or Cutting
Corners, which hit No. 1 on Amazon’s best-seller list.

To learn more about Marc’s books, check out our Best Finance Books.




ARTICLES BY MARC LICHTENFELD





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