Look, I don't mean to scare you, but...
At first glance, Verizon's dividend looks like one of the most desirable in the S&P 500. Currently over 7.2%. Plus, the dividend has increased every year since 2007.
The problem is that paying the dividend is looking like an increasingly difficult task for Verizon. In 2022, free cash flow of $14 billion covered the $11 billion dividend cost. But it has big expenses for necessary network upgrades. That means Verizon's capital spending, which reached $23 billion in 2022 alone, is unlikely to slow down. Moreover, along with spending on wireless licenses, they have contributed significantly to the $153 billion in total debt that Verizon is juggling. That's a huge burden for a company that has "only" $94 billion in equity. In 2022, Verizon had a debt cost of $4 billion. Now, with interest rates rising, that cost is likely to increase.
In your opinion, will Verizon be forced to put the brakes on dividends a bit? 🤔
Debt is always a burden, and all the more so when it does not grow profits or increase company activity and assets. In my opinion, it's only a matter of time before debt catches up, the dividend cut comes, and the talk of change starts.
My bet with Verizon is that they can still continue in this "debt mode" for a while. In the meantime, I'll collect a few dividends and then, if nothing improves, move elsewhere. The dividends should have been cut long ago and the debt should have been paid first.
I'm just watching her for now too, and I'm hesitating right now. Nice numbers, thanks for adding, I didn't know them specifically like that but just as you write, I like the company, however I see it financially challenging for it now to keep up with the times technologically and still offer quality service. I guess if hodl made the move and lowered the dividend a bit for maybe 1-2 years, it could help it a lot and certainly keep shareholders loyal.
I don't think so, and I see it here too, where the dividend is the main thing that interests a lot of people, and as soon as it is cut or suspended they sell off their shares.
Yeah, well, I get that, but it's a shame. Personally, even though the dividends are fine, when there is a small drop, I don't get scared and stay loyal, just how many times that dividend drop can be healthy if they do well with the money they save.