We recently compiled a list of the 12 Best Long-Term Dividend Stocks to Invest in Right Now. In this article, we are going to take a look at where Verizon Communications Inc. (NYSE:VZ) stands against the other best dividend stocks for the long term.
The allure of steady income remains a top priority, come rain or shine in the market and for that, investors often prioritize stable companies. High-quality stocks provide investors with the opportunity to earn through dividends while also benefiting from potential price growth fueled by increasing earnings. According to a report by Hartford Funds, dividends have been a major contributor to the returns investors have enjoyed over the past several decades. Since 1960, reinvested dividends and the impact of compounding have accounted for 85% of the cumulative total returns of the broader market.
Before exploring the long-term benefits of dividend stocks, let’s take a look at how dividend investing has performed in recent years. The year 2024 has been particularly notable for dividends, with several major tech companies introducing quarterly payouts to shareholders in the first quarter. In addition, the sustained inflows into dividend-focused ETFs, even during challenging years like 2024, are a positive sign. This suggests that dividend investing may rely less on chasing performance compared to other strategies. Furthermore, US companies are on pace to set a new record for total dividend payments by year-end. This trend has left analysts optimistic about the future potential of dividend investing.
Over the long term, companies that pay dividends have demonstrated a remarkable history of delivering strong total returns. Data from the French Data Library, highlighted in a June report by Morningstar, showed that dividend-paying stocks outperform those that don’t, with high-yield stocks being the top-performing income segment in the US equity market since 1927. The reasons for this include the elimination of speculative companies, the financial discipline imposed on corporate managers by regular dividend payments, and the advantage of the “value effect,” where stocks with lower valuations tend to outperform over time.
READ ALSO: 8 Best American Dividend Stocks To Buy Right Now
Steven Wieting, who serves as the chief investment strategist at Citi Wealth, expressed the view that high-quality dividend-paying stocks across different sectors have the potential to deliver better performance than the broader market in the coming years. During a conversation with Barron’s, he highlighted that an increasing dividend provides a clear advantage to shareholders while also reflecting the financial strength of companies with robust balance sheets. He remarked that dividends are a reliable indicator since they cannot be fabricated.
That said, maintaining consistent dividend growth over time requires both financial stability and a strong commitment. Stocks that focus on dividend growth have historically outperformed the market, thanks to their potential for capital appreciation and robust financial health. The Dividend Aristocrats Index, which includes companies that have increased their dividends for at least 25 consecutive years, has provided shareholders with a remarkable return of 10.68% from its inception in 2005 through 2023, according to ProShares. In contrast, the broader market returned only 10.05% during the same period. Notably, the dividend aristocrats achieved these impressive returns with lower volatility, recording a volatility rate of 15.30%, compared to the benchmark’s 16.24%. This demonstrates that investing in dividend growth stocks can offer both stability and attractive returns over time.
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Our Methodology
To compile this list, we thoroughly reviewed reputable sources such as Forbes, Morningstar, Barron’s, CNBC, Times, and Business Insider. We aimed to identify the top long-term dividend stocks recommended by financial media, analysts, and experts. From our research, we picked 12 dividend stocks which are the most popular in the financial media these days. These stocks have strong dividend histories and are financially sound, indicating their ability to sustain dividend payments well into the future. The list is ranked in ascending order of the number of hedge fund investors, according to Insider Monkey’s database of 900 hedge funds as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 57
Verizon Communications Inc. (NYSE:VZ) is an American telecommunications company that offers services in communications, technology, information, and entertainment. The company is aiming to acquire Frontier as part of its strategy to enhance its position in the growing fiber-optic internet market. Verizon sees fiber as a key area for future growth. If the company can make Frontier’s operations profitable, the acquisition could prove beneficial in the long term. This is because customers who use both Verizon’s mobile and internet services tend to be more loyal and are less likely to switch providers, according to the company. Since the start of 2024, the stock has surged by more than 8%.
In the third quarter of 2024, Verizon Communications Inc. (NYSE:VZ) reported revenue of $33.3 billion, a slight decrease of 0.02% compared to the same period last year. Its wireless revenue reached $19.8 billion, reflecting a 2.7% year-over-year growth. In addition, the company achieved 389,000 net broadband additions, marking the ninth consecutive quarter with over 375,000 net additions in broadband.
Third Point Management also highlighted the company’s acquisition in its Q3 2024 investor letter. Here is what the firm said:
“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. Second, Verizon Communications Inc. (NYSE:VZ) announced a deal to acquire Frontier Communications (FYBR), a transaction which the fund benefited from by virtue of its investment in FYBR debt. This transaction, aimed at increasing’s VZ fiber footprint, has led to broad revaluation of fiber retail networks that we think is appropriate. While we continue to expect to see FWA rapidly erode non-upgraded cable and especially copper’s share of the low-end broadband market, the VZ deal underscores the value of the higher end footprint.”
Verizon Communications Inc. (NYSE:VZ)’s cash position makes it a strong dividend payer. In the first nine months of the year, the company generated $26.5 billion in operating cash flow and its free cash flow for the period came in at $14.5 billion. It maintains an 18-year track record of consistent dividend growth. On December 5, the company declared a quarterly dividend of $0.6775 per share, which was in line with its previous dividend. The stock offers an attractive dividend yield of 6.45%, as of December 11.
According to Insider Monkey’s database of Q3 2024, 57 hedge funds owned stakes in Verizon Communications Inc. (NYSE:VZ), down from 67 in the previous quarter. These stakes have a collective value of more than $3.2 billion. Rajiv Jain’s GQG Partners was the company’s leading stakeholder in Q3.
Overall, VZ ranks 6th on our list of the best long-term dividend stocks to invest in right now. While we acknowledge the potential for VZ to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than VZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
