Verizon Communications (VZ) Rewards Shareholders with Dividend Increase
We may earn money or products from the companies mentioned in this post.
It’s seems like it has been a long time since we reported a company dividend increase … about 2 months actually. And while it has been some time, the companies we own that are getting ready to announce a dividend hike is ready to jump.
That is the best thing about owning a portfolio of dividend paying stocks! The raises that my family gets almost every single year from the 30+ stocks that we own. Some companies give great big raises of 17% or higher. Others give small raises around 2%.
Collectively, each of these raises in our portfolio pushes our dividend income higher by 5% to 7% every year. That turns out to be an extra $150 of income we get … and we don’t have to lift a finger. Next year … that $150 in extra income will be even higher because each and every dollar earned right now is reinvested.
As we continue to invest more and more money each year into dividend stocks and reinvest that extra $150 … our total dividend income compounds year after year.
Dividend increases come in throughout the year for the companies we own … and we like to celebrate each one.
The first announcement in September came from a high yield company with low (but steady) dividend growth.
The most recent dividend increase (or raise) from a stock we own was from Verizon Communications (VZ).
VZ Shareholders Get a 2.2% Raise
Verizon Communications (VZ) recently announced an annual dividend increase. The company has been consistently raising annual dividends for the past 12+ years.
Company shareholders will now receive $0.59 in quarterly dividends for each share they own … instead of $0.578 paid previously. This increase comes well below our desired dividend growth rate of at least 6%.
The latest increase bumps the annual dividend for VZ up to $2.36 per share compared to $2.31 last year.
Overall, that is a 2.2% increase in dividend income. That isn’t at our preferred 6% growth … but it is positive growth and more future income just the same.
How Much Extra Income?
We currently own 29.292 shares of VZ in our Money Sprout Index.
This latest dividend increase has pushed our 12 month forward dividend income for VZ up to $69.13, compared to $67.66 last year.
That is an annual dividend income increase of $1.46.
This is yet another reminder that our dividend income stream is constantly growing every single day … without any extra work from us … no matter how large or small the increase.
With this latest increase by Verizon Communications, along with recent stock purchases and dividend reinvestment … our annualized forward dividend income has risen to $2,711.14.
Dividend Growth for VZ
We have owned shares of Verizon for about 3.5 years.
Overall, the company has grown their dividend during that time … but at a slower rate compared to other companies that we own.
Take a look at the annual dividend payments since 2012 –
- 2012 – $2.015
- 2013 – $2.075
- 2014 – $2.140
- 2015 – $2.215
- 2016 – $2.273
- 2017 – $2.324 (projected)
Note – The 2017 dividend has been adjusted to reflect the annual increase coming after the 3rd quarter payout.
As you can tell from the numbers above, VZ dividends have been raised consistently over the past several years.
Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher.
Verizon has not been able to sustain a dividend growth rate that is close to the 6% (or higher) that we look for in a stock.
Here are a few average growth rates for shares of Verizon –
- 1 Year DGR – 2.24% (2016 to 2017)
- 3 Year DGR – 2.79% (2014 to 2017)
- 5 Year DGR – 2.90% (2012 to 2017)
Verizon – Buy, Sell, or Hold?
We started buying shares of Verizon back in April of 2014.
Since that time, we have earned $148.75 in dividends from the company and 2.1333 additional DRiP shares.
Note – We no longer use DRiP to reinvest our dividends in Verizon. Unfortunately, the fee’s charged by the company to reinvest were too much. Our shares are currently held with the 3rd party transfer agent, Computershare. We receive a dividend check in the mail now that is eventually reinvested into shares of other companies.
Here are a few stats from over the years of buying stock in Verizon –
- Total Investment – $1,350.00
- Shares Purchased – 27.1586
- Dividends Earned – $148.75
- DRiP Shares – 2.1333
At the time of this writing, VZ does meet most of our stock screen criteria based on the following metrics –
- Current Yield – 4.82%
- Payout Ratio – 59.23%
- Forward P/E Ratio – 12.30
The company meets the current yield requirement of being greater than (or equal) to 2% coming in at 4.82%. In addition, the payout ratio is around 59%, which is less than the 60% threshold we have set. Finally, the forward P/E ratio is under 20 – which was 12.30.
The one downside is the very low dividend growth rate of 2% to 3% over the years. However, a current yield of almost 5% makes that less of a concern.
However, I do believe it is important to allocate a small portion of your overall portfolio to high yielding/low growth stocks.
Based on all of this, we have VZ as a solid HOLD for our portfolio. If at anytime, the company were to cut their dividend … we would sell our shares immediately.
However, we are not actively buying any new shares in the company because it already makes up 4% of our overall portfolio. We are more focused on buying dividend stocks with higher growth rates.
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – VZ. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.