Is Verizon's 6.6% Dividend Yield Sustainable?

Verizon Communications (NYSE: VZ) shares currently yield roughly 6.6%. Investors are often attracted to high-yield stocks for their income potential. However, high dividend yields can sometimes be a sign that the dividend is not safe because market participants often anticipate a cut to the payout in advance.

Recent examples of high-profile companies that have slashed their dividends include Verizon peer AT (NYSE: T), which cut its payout nearly in half in 2022, and Walgreens Boots Alliance, which recently reduced its dividend by almost 50%, ending 47 years of dividend growth. Prior to AT's dividend reduction, the stock was yielding more than 8.5%. Walgreen shares were yielding over 7.5% before the company decided to slash the dividend.

Verizon currently pays a quarterly dividend of $0.665 per share, which equates to $2.66 on an annual basis, and it expects fiscal 2024 adjusted earnings per share (EPS) of $4.50 to $4.70. Thus, the company has a payout ratio of roughly 58%. Adjusted EPS is an appropriate measure to use to get a sense of the business's true earnings power because it excludes the impact of one-time events such as restructuring charges and legal settlements.

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Source Fool.com