Summary
- As a dividend growth investor, Verizon checks many of the boxes that I look for.
- Is the past a good predictor of how things will be going forward for the company?
- A healthy balance sheet means the dividend is safe.
- Future growth is tied to the development of the 5G network and the spin-offs it will create.
I originally started investing in Verizon (NYSE:VZ) because of the dividend and a belief that it was a low risk way to invest in the technology industry. To date, I have not been disappointed, but I would be lying if I said I am thrilled by their results. With a dividend that pays in the 4% range, it meets my income target, but with its slow growth, this stock is more the tortoise than the hare. With uncertainty looming in the overall market, I am taking a look at the company and asking the question, is slow and steady worth the opportunity cost, or is it time to move on?
My investment style
I am an early retiree. I am too young to start collecting a government pension, so I depend on my investment income to pay my bills and fund my lifestyle. As such, I look for solid companies with a long history of dividend payouts which yield in the 3-7% range. As important to me as the dividend payout is the realized growth in those payouts. My goal is to improve my quality of life year after year, so I look for companies that increase their payouts in the 5% plus range on a yearly basis. I chose 5% because it keeps me ahead of inflation, which is usually around 2%, but it also provides the quality of life improvements that I want. It is nice to find those companies with 10% dividend increase, but they tend to be starting from a much lower base.
With a 4% dividend yield, Verizon meets my goal on the yield front, and I am happy that they have consistently increased their dividend over time at an annual 3.7% rate. The concern I have is that the rate of growth is slowing, and over the last 3 years, that rate has only averaged 2.1% falling below my targeted range for dividend growth.
