Verizon May Grant Investors Smallest Quarterly Dividend Raise Since 2006
Verizon May Grant Investors Smallest Dividend Since 2006
Jin Lee/Bloomberg
Customers enter a Verizon Wireless store in New York.
Customers enter a Verizon Wireless store in New York. Photographer: Jin Lee/Bloomberg
Verizon Communications Inc., the second-largest U.S. phone company, may increase its quarterly dividend by the smallest amount in four years tomorrow amid slowing sales growth, according to a Bloomberg estimate.
Verizon may raise its dividend to 48.5 cents a share, from 47.5 cents, according to the estimate. That would follow a 1.5- cent increase a year ago and a 3-cent bump in 2008. Rich Young, a Verizon spokesman, declined to comment.
The carrier’s dividend has a correlation to its revenue, according to Bloomberg analysis. Sales may shrink for the first time in five years this year, by 1.3 percent to $106.4 billion, based on the average of 25 analysts’ estimates in a Bloomberg survey. The company is grappling with home-phone losses and job cuts that led business customers to curb spending.
“The ability to return cash to shareholders has been extremely stress-tested over the past two years,” said Richard Dineen, a New York-based analyst at HSBC Securities USA Inc. who rates the shares “overweight” and doesn’t own any. “I could understand if there was potentially a little bit of cautiousness given the fairly weak economy.”
Verizon’s 12-month dividend yield, the annual payout per share divided by the share’s price, is 6.3 percent. Companies on the S&P 500 have an average dividend yield of 2.1 percent and those in the S&P telecommunications-services index pay out 5.7 percent on average.
Frontier Payment
Verizon investors have received shares of Frontier Communications Corp. this year after the company spun off home- phone lines in return for 68 percent of Frontier’s common stock.
That worked out to a payment of about $1.72, or almost a quarter of a share in Frontier for every share of Verizon owned as of June 7. In addition, Frontier pays a quarterly dividend of 18.75 cents.
“There’s a case to be made that management has already given shareholders an increase this year with the Frontier transaction,” said Rick Franklin, an analyst at Edward Jones in St. Louis, who advises investors to hold the shares and doesn’t own any.
Verizon, based in New York, rose 73 cents to $30.26 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 2.2 percent this year.
The company raised its dividend by 2.5 cents in 2007, after leaving it unchanged in 2006, the year it bought MCI Inc.
The carrier reported sales of $107.8 billion in 2009.
The Bloomberg dividend forecasts are based on seven criteria including a company’s forecasts, dividend history, regression analysis, and put-call parity.
To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net
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