Verizon Communications Inc. (NYSE:VZ) offers investors a high dividend yield, supported by steady wireless revenue, broadband growth, and strong cash generation. The real question is whether Verizon’s improving performance can make up for its heavy debt load and the higher opportunity cost of holding income stocks in today’s market.
In the second quarter of 2026, Verizon’s adjusted earnings per share came in at $1.30, up 6.6% compared to last year. However, GAAP EPS dropped 22% to $0.92. The company’s operating cash flow climbed 16.3% to $10.4 billion, and free cash flow jumped 24.4% to $6.4 billion. With an adjusted EBITDA margin reaching 40.1%, management felt confident enough to raise its full-year outlook.
These numbers reinforce Verizon’s case for its dividend, but it’s important to note the difference between adjusted and reported earnings. Special items led to a big gap between the two, and the company still needs to invest in its network to protect its market share and keep expanding its broadband services. Still, Verizon remains a blue-chip dividend stock worth watching. Explore other top-ranked dividend stocks here.
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Cheap Earnings, but What About Total Returns?
Verizon Communications Inc. forward P/E ratio sits at 8.73, and a trailing P/E is at 12.11. The lower forward P/E suggests analysts are expecting the company’s earnings to improve. Its forward multiple is also below AT&T’s 9.90, while its own forward P/E has ranged from 8.50 to 10.20 over recent quarters. This means Verizon looks like a good value compared to AT&T, but the discount isn’t as striking when you look at VZ’s own recent history. Read the full analysis here: AT&T (T) vs Verizon (VZ): Which is a Better Stock to Buy?
With a forward P/E of 8.73, Verizon’s implied earnings yield is about 11.5%. That’s much higher than the 10-year U.S. Treasury yield, which was around 5.2% on October 13, a difference of about 6.3 percentage points. But it’s important to remember that this spread doesn’t guarantee extra returns. Stock earnings can go up and down, debt payments eat into cash, and the P/E ratio could fall further if Verizon’s growth doesn’t live up to expectations. The company only looks like a bargain if its earnings recovery turns into lasting cash flow.
Also read: 10 Best US Stocks to Buy Under $50
Cash Flow Supports the Payout, but Debt Matters
Verizon’s forward dividend yield is about 6.6%, which translates to an annual payout of $2.83 per share. Compared to its trailing EPS of $3.84, that’s a payout ratio of around 74%. The dividend is on firmer ground when you look at cash generation: in the first half of 2026, the company produced $10.2 billion in free cash flow, up 16% from the year before. In addition, it has also rewarded shareholders with growing dividends for 20 consecutive years. Read VZ’s dividend story here.
Still, Verizon paid out $11.5 billion in dividends in 2025, while its total debt hit $158.2 billion by year-end. The company’s network requires constant investment, and with rising refinancing costs, it might be harder to keep increasing its dividend in the future.
Conclusion
Verizon provides an attractive income stream, but it isn’t a risk-free alternative to bonds. The company’s forward valuation and growing free cash flow help support the dividend, but its high debt and slow growth mean there’s not a huge cushion if things go wrong. For investors with a long-term view, the best reason to own Verizon is steady growth in cash flow and gradual reduction of debt, not just the dividend yield.
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This article is originally published at Insider Monkey.
