Walgreens Boots Alliance recently announced its decision to decrease its dividend, resulting in Verizon Communications now holding the most generous payout in the Dow.
On Thursday, Walgreens revealed that it would be cutting its dividend from 48 cents to a quarter per share. This decision caused the stock to drop by 7.5% and reach $23.67 per share. In the past year, the stock has already experienced a decline of 35%, making it poised for its largest one-day percentage decrease since April 2019.
For those who prioritize dividends when investing, it’s important to note that Walgreens’ dividend payout is no longer the highest relative to the stock price within the Dow Jones Industrial Average. Instead, that distinction now belongs to Verizon Communications.
Typically, a high dividend yield is perceived positively as it indicates a company’s financial confidence and commitment to providing regular returns to shareholders at a reasonable price.
However, excessively high dividend yields may warrant concern. Oftentimes, a high yield is a result of a significant decline in the stock price. As demonstrated by Walgreens and other companies, such high yields can prove to be unsustainable.
Verizon currently boasts the highest dividend yield in the Dow, standing at 6.74% as of late morning. Nevertheless, there doesn’t appear to be any immediate risk to its payout.
In September, Verizon increased its dividend by 1.25 cents per share, reaching a total of 66.50 cents per share. This marks the company’s 17th consecutive year of dividend increases, making it the longest streak within the U.S. telecom industry.
Verizon’s Dividend Commitment Remains Strong
During Verizon’s recent earnings call, CEO Hans Erik Vestberg emphasized the company’s healthy dividend coverage. He revealed that the year-to-date free cash flow dividend payout ratio stood at approximately 56%, a significant improvement from the previous year.
Verizon’s Chief Financial Officer, Anthony Skiadas, reaffirmed the company’s commitment to dividend payouts during a Morgan Stanley conference in mid-November. Skiadas expressed pride in the September dividend hike, highlighting Verizon’s dedication to rewarding its shareholders.
These statements should provide comfort to investors, assuring them of Verizon’s consistent payout reliability.
Known for its generous dividends, the dividend yield on AT&T stock closely rivals Verizon’s at 6.45%.
However, experts argue that dividends alone shouldn’t be the sole reason to invest in Verizon. The stock has already received two upgrades in the first few trading days of 2024. Keybanc Capital Markets upgraded it to “Overweight,” foreseeing a return to growth this year. Similarly, Wolfe Research raised its call to “Outperform,” citing the company’s reduced leverage and improving sales as key drivers.
Although Verizon shares experienced a slight 1% increase on Thursday, they have retreated by approximately 4% over the past year.
