The proportion of Verizon Communications (NASDAQ: 868402) already has a pretty compelling dividend today. It is currently around 5.6% which seems quite attractive. But of course foolish investors want more. In other words, dividend growth that increases the total payout per share in the long term.
Let’s think about what might be possible in five years. Buffett’s stock, which was last hit by the Oracle of Omaha, has potential. But is a 7% yield possible? First of all, let’s calculate what would actually be needed for this.
Verizon: 7% dividend yield in 5 years?
We already know the starting point for Verizon Communications: We see a 5.6% yield. In five years, the total payment per share increase by 4.56% per year in order for us to achieve this goal. Sounds relatively moderate and therefore realistic, right? Maybe. But we shouldn’t underestimate how modest dividend growth actually is right now.
Most recently, Verizon Communications management increased the dividend per share. share from $0.627 to $0.64. This means that there has been a growth of 2.07% in the past year. Before that, growth was also very moderate at 1.95%. At a low level, unfortunately, we have to say that if growth rates remain as they are, we should be pessimistic. When it comes to dividend growth, this stock isn’t the big hit.
But more could certainly be possible. Verizon Communications currently has a payout ratio of less than 50% of earnings per share. share measured at 2021 figures. A higher yield would therefore be possible. For example, if management were to increase the payout per share more to counter inflation, a dividend of 7% would be conceivable.
Yet the yield is not its only priority. Management invests in the balance sheet and profitability and only secondarily wants to enable steadily growing dividends. So we’ll be excited to see what that means in terms of dividend growth going forward.
Not a sure success!
The fact that Verizon Communications is achieving a 7% dividend yield is by no means a surefire success for me. It is possible and conceivable. The low payout percentage is especially encouraging. But the downside is that management has previously enabled modest gains. Therefore, the following applies to me: I don’t expect that. But there is a chance that could definitely help the stock jump.
With a price-to-earnings ratio of just 9 and a yield of 5.6%, Verizon Communications is still a value proposition. Is that enough for you? It is a question that you as an investor must answer yourself.
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Vincent owns shares in Verizon Communications. The Motley Fool recommends Verizon Communications.