Verizon dividends are calling

As the largest wireless carrier in the United States, Verizon Communications (NYSE: VZ) offers a safe and stable dividend funded in part by nearly 95 million monthly cellphone bills. While Verizon isn’t a growth stock (operating revenue grew just 0.8 percent last year), it steadily increases its dividend every year and produces strong free cash flow (around $17 billion in 2019) to cover the payout. That’s a testament to Verizon’s scale: The wireless industry is notoriously capital intensive, yet Big Red is still able to invest heavily in 5G technology while having plenty of cash left over with which to pay investors.

Competition will remain intense — particularly if Tmobile US and Sprint are able to close their proposed $26 billion merger, as the combined company would represent a stronger threat. But Verizon has been defending its position for quite a while; the company recently posted its highest number of fourth-quarter wireless additions in six years. Its total debt load is high at $111.5 billion (as of Dec. 31), but Verizon plans to deleverage over time while remaining committed to its dividend.

In the event of an economic downturn, cellphone bills and other basic utilities remain a top priority in consumers’ household budgets relative to discretionary items, reducing the risk to Verizon’s dividend. That dividend recently yielded a hefty 4.2 percent, making Verizon a top pick for patient investors seeking income. (The Motley Fool has recommended Verizon.)