Verizon: A Leader in Dividend Stocks

Verizon has established itself as an outstanding dividend stock. With a dividend yield of approximately 6.5%, the telecommunications giant significantly surpasses the S&P 500 average, which is around 1.4%. Thanks to the high yield, an investment in Verizon could be an excellent way to collect dividends. To illustrate: To achieve $1,000 in annual dividend income, one would need to own 376 shares of Verizon. With a recent stock price of about $41 per share, this translates to an investment of just over $15,400. In comparison, nearly $77,000 would need to be invested in an S&P 500 index fund to achieve the same income. An investment of $15,400 in the index fund would, however, only generate about $200 in annual dividend income. Verizon's high dividend yield is based on a solid foundation. The company generated a free cash flow of $8.5 billion in the first half of the year after investments, enough to cover the dividend payout of $5.6 billion. The excess free cash flow is used to further strengthen the already solid balance sheet. The robust financial situation and the increasing free cash flow – an increase of $500 million over the last year – position the company to further increase its dividend. Verizon's dividend payment was increased by about 2% last fall, the 17th consecutive year, representing the longest current streak in the US telecommunications sector. With further dividend increases in sight, Verizon is an excellent stock for investors seeking high income. However, before investing in Verizon Communications, consider the following: The Motley Fool Stock Advisor's analyst team has recently identified what they believe are the 10 best stocks for investors – and Verizon Communications was not on that list. These 10 stocks could deliver substantial returns in the coming years. Consider that Nvidia was on this list on April 15, 2005. If you had invested $1,000 then, it would have grown to $657,306! The Stock Advisor provides investors with easy-to-understand guidance for success, including portfolio-building recommendations, regular updates from analysts, and two new stock picks each month. Since 2002, the service has more than quadrupled the S&P 500's return.