Verizon Communications Inc. (NYSE:VZ) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Verizon Communications Inc. (NYSE:VZ) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company’s books on the record date. Accordingly, Verizon Communications investors that purchase the stock on or after the 7th of July will not receive the dividend, which will be paid on the 1st of August.

The company’s next dividend payment will be US$0.64 per share, and in the last 12 months, the company paid a total of US$2.56 per share. Calculating the last year’s worth of payments shows that Verizon Communications has a trailing yield of 5.0% on the current share price of $51.64. If you buy this business for its dividend, you should have an idea of ​​whether Verizon Communications’s dividend is reliable and sustainable. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Verizon Communications

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Verizon Communications’ payout ratio is modest, at just 50% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The company paid out 101% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect – but we’d generally want to look more closely here.

Verizon Communications paid out less in dividends than it reported in profits, but unfortunately it didn’t generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Verizon Communications’s ability to maintain its dividend.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

NYSE: VZ Historic Dividend July 2nd 2022

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it’s a relief to see Verizon Communications earnings per share are up 9.6% per annum over the last five years. Earnings have been growing at a steady rate, but we’re concerned about dividend payments consumed most of the company’s cash flow over the past year.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Verizon Communications has lifted its dividend by approximately 2.5% a year on average. We’re glad to see dividends rising alongside a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Should investors buy Verizon Communications for the upcoming dividend? Verizon Communications has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. Overall, it’s not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So if you want to do more digging on Verizon Communications, you’ll find it worthwhile knowing the risks that this stock faces. Every company has risks, and we’ve spotted 3 warning signs for Verizon Communications you should know about.

If you’re in the market for strong dividend payers, we recommend Checking our selection of top shares stocks.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Leave a Comment

Your email address will not be published.