Verizon: A Dividend Stock for Your Portfolio

Verizon Communications Inc. (NYSE:VZ) currently boasts an amazing 6.5% dividend yield.  Traditionally speaking, stocks with incredibly high dividend yields are often that way for a reason, meaning there is something wrong with the underlying company that has driven stock price down and results in a large dividend yield (dividend / share price).  Fair enough, so let’s dig a little deeper with MSN’s world famous Jim Jubak.

Jim writes that the yield of 6.5% for Verizon Communications Inc. (NYSE:VZ) is much higher than the yield on the Standard & Poor's 500 index (2.1% as of last week) (and) that any reasonable investor wants to know what the market thinks is wrong with (Verizon).

He goes on to describe in detail what he thinks is wrong with Verizon, but also dubs it a "giant cash machine":

The company's land line business is slowly shrinking. In the second quarter, phone lines to homes and businesses declined by almost 10% from the second quarter of 2008.

The U.S. wireless market, which is supposed to grow fast enough to make up for the drop in land line phones, is nearing saturation. There are now nine mobile devices in circulation for every ten people in the United States.

Verizon's solution is to invest in its network so that it can add more very profitable Internet and video users through its FIOS system. That's enormously expensive. The company plans to spend $23 billion in 2009 and 2010 to build out its fiber optic network.

[READ THE ENTIRE STORY HERE]

Jim concludes with:
“I think the worries are overstated, the price is overly depressed, and the yield is a bargain.

Friday, I'm adding Verizon to my ten-stock Dividend Income portfolio to replace U.S. Bancorp (NYSE:USB). I'll start tracking the whole portfolio next week.”

If you are a dividend investor, you might want to consider Verizon Communications Inc. (NYSE:VZ) as well.

Disclosure: No positions in VZ at the time of this writing.