Dividends in Focus: AT&T vs.Verizon

Any dividend investor concerned with yield has probably come across high yield telecom companies, AT&T (NYSE: T) and Verizon (NYSE: VZ). Both of these companies are excellent opportunities for dividend income, and are also great in Dividend Reinvestment Programs (DRIPs). Over the long term, these stocks have the potential to generate significant income for investors.

At a glance, it may be tough for dividend investors to make a choice between these two stocks. After all, they are pretty similar as far as share price appreciation and dividend yield. Below is a five year chart for AT&T and  Verizon. Both companies saw similar performance.

vzatt

As of March 16, 2017, both Verizon and AT&T closed at the trading day with the exact same dividend yield – 4.62%. This yield will vary, of course, but the companies generally offer similar yields.

Annual Payouts

Both companies have impressive histories of increasing payouts annually. However, AT&T does have Verizon beat on number of consecutive dividend increases. AT&T has been increasing dividends three times as long as Verizon. The charts below illustrate the stocks’ annual dividend payouts since they began increasing dividends.

Verizon has been raising its dividend since 2007. It has been paying a dividend since 2000 as Verizon, but previously traded as Bell Atlantic. Bell Atlantic initiated its dividend in 1987.

verizon annualized

AT&T has a long history of raising dividends. It has been increasing its annual payout since 1988 (shown below). The stock has been paying dividends since 1984.

attannual

 

Dividend Growth

Just like people need raises, investors also need their dividends to grow. These companies do not generally offer giant dividend increases every year, but with a yield already so high, investors remain happy.

On average, Verizon increases its dividend by 3.45% annually (typically announced in September).  AT&T increases its dividend by an average of 4.28% per year, and usually announces the higher dividend around December.

These stocks are not growth stocks. They may sometimes be viewed as boring, safe stocks, but there is nothing boring about making money with dividends. The stocks tend to be conservative, and investors may receive less in capital gains during a bull market. However, during a market downfall, investors tend to lose less with these stocks.

Both Verizon and AT&T have made aggressive moves over the last couple years, though. As the companies grow older and struggle to expand, they resort to mergers and acquisitions. Last year, AT&T reported its plan to purchase Time Warner in a $85.4 billion deal. This deal has recently been approved by the European Commission. Verizon has made similar deals, too, as it acquired AOL for $4.4 billion in June 2015.

Earnings

So AT&T and Verizon have pretty similar dividend yields, but how about their earnings? Total net income has historically surpassed Verizon, but Verizon has reported higher income in the last two years. What is also important is that the companies have done a pretty good job meeting analysts’ expectations.

Net Income (in billions)

earningsvzt

 

 

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