The wireless communication giant
Verizon Communications
(
VZ
) hiked its annual dividend by 3% to $2.06 per share, reflecting
its strong commitment to deliver increased returns to its
shareholders.
Verizon will now pay a quarterly dividend of 51.5 cents compared
with 50 cents paid this year. This marks the sixth consecutive year
of dividend hike. Last year, Verizon had increased its annual
dividend by 2.6% to $2.00 per share.
The new dividend will be paid on November 1, 2012, to shareholders
of record as of October 10, 2012. The new annual payout of $2.06
represents a dividend yield of 4.70%. The dividend hike is similar
to the hike by its key rival and the second largest U.S. mobile
service provider
AT&T Inc
. (
T
), which raised its annual dividend by 2.3% to $1.76 per share in
December last year, reflecting a dividend yield of 4.70%.
Verizon distributed $2.6 billion and $5.5 billion as dividends to
its shareholders in the first half of this year and fiscal 2011,
respectively. By comparison, AT&T paid dividends of $10 billion
and $10.1 billion in the first half of this year and fiscal 2011,
respectively.
Other telecom service providers such as
CenturyLink Inc.
(
CTL
),
Windstream Corporation
(
WIN
) and
Frontier Communications
(
FTR
) currently offers higher dividend yields of 6.80%, 10.00%, and
8.60%, respectively.
The dividend hike reveals Verizon's solid financial position, with
a healthy balance sheet and growing free cash flows. Continued
growth in wireless business and falling capital efficiency (capital
expenditure-to-revenue ratio) also support robust cash flow
position. Management continues to expect capital efficiency to
decline through the year, leading to more expansion of free cash
flow.
We have a long-term Neutral recommendation on Verizon. Currently,
the stock retains the Zacks #3 (Hold) Rank for the short term (1-3
months).
CENTURYLINK INC (CTL): Free Stock Analysis
Report
FRONTIER COMMUN (FTR): Free Stock Analysis
Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
WINDSTREAM CORP (WIN): Free Stock Analysis
Report
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