As a rule, dividend stocks that provide the best buy-and-hold opportunities are often boring, albeit dependable, businesses. Think of banks, insurance companies, telecoms and utilities.
Each month these companies take their fees out of customer bank accounts, but unless something goes wrong, customers rarely complain. This ‘cash cow’ component of the business model makes shares of these companies perfect candidates for a retirement portfolio, one that’s built to earn growing income in preparation for, and during, an investor’s golden years.
Another reason to own these dividend-paying stocks: no surprises each time you check your portfolio. They simply continue slowly adding wealth, boosting a retirement portfolio at regular, prescribed intervals.
Verizon (NYSE:VZ), the US’s largest wireless carrier, hits all these parameters perfectly. And right now, if you’re looking for safety after the market’s steep correction during the past two months—particularly among high-growth technology shares—the timing looks opportune. In a challenging environment for the traditional telecom industry, where there’s intense competition from disruptors, to survive, Verizon is doing many things right.
Slow And Steady Growth
Instead of bulking up its balance-sheet with mega deals, Verizon has been focusing on improving its infrastructure. Indeed, the telecom has avoided the big entertainment acquisitions that peers like AT&T (NYSE:T) and Comcast (NASDAQ:CMCSA) have pursued.
Instead, the carrier has made smaller bets focused on enhancing its strategy to quickly improve its network. Due to its timely acquisition of Straight Path Communications earlier this year, Verizon is ahead in the race to build a fifth-generation network, part of an industry-wide effort to increase speeds and open up new revenue sources.
The acquisition was the culmination of an intense bidding war with AT&T; Verizon paid $3.1 billion for Straight Path, which holds very valuable licenses in the wireless spectrum, that can be used for delivery of faster 5G service.
This traditional, slow but steady approach isn’t generating too many headlines for the carrier. However, it’s clearly helping keep the growth momentum going.
In the third quarter, Verizon posted its sixth straight quarter of subscriber growth. During the period, Verizon added 515,000 subscribers, topping the 468,000 predicted. That helped push its earnings to $1.22 a share, 3 cents above Wall Street estimates.
For income investors, the most important thing is to see how effective their investments are through the thick and thin of market activity. In the case of Verizon, over the past six months the stock has hugely outperformed, both versus the S&P 500 and the company’s closest rival, AT&T.
For the period mentioned, Verizon shares are up about 23% versus a 3% decline for the benchmark index and 9% plunge in AT&T stock.
Verizon also has a solid track record of rewarding investors with growing dividend payouts. Verizon hiked its quarterly dividend by 2.2% this year, bringing its payout to $0.6025 a share.
At the stock’s current $59.16 price, that’s a robust annual dividend yield of 4%. Perhaps even better, this was the 12th consecutive year that Verizon’s board approved a quarterly dividend increase. And with a payout ratio of 50.63%, there’s still plenty of room to run if the company decides to increase it’s dividend yet again.
Telecoms may not provide hefty capital gains such as those delivered by high-flying, more volatile technology stocks. But the downside risk during times of distress is also limited. With its strong balance-sheet, growing dividend, and leading position in the 5G rollout, Verizon is a solid—and comparatively safe—income choice for long-term investors looking to shield their portfolios from ongoing market volatility.