This year, I’ve noticed quite a rollercoaster ride for the U.S. stock market, with numerous shares reaching remarkable peaks only to plummet dramatically shortly after. For individual investors like myself, navigating through this unstable investing terrain can be an intimidating challenge.
Indeed, investing in dividend-yielding stocks can provide significant passive earnings, despite market volatility. By making wise selections, investors can earn a consistent dividend return, even on a more limited initial investment.
Investing an equal amount, say $2,000, in companies like Verizon Communications (VZ), AT&T (T), and AbbVie (ABBV) results in a yearly passive income of approximately $282.60. Here’s the breakdown of the dividend earnings:
* Verizon Communications (VZ): $137.50
* AT&T (T): $94.80
* AbbVie (ABBV): $49.30
With a 6.5% yield, $2,000 invested in Verizon will generate $130.20 in annual dividends.
With a 4.1% yield, $2,000 invested in AT&T will generate $82.40 in annual dividends.
With a 3.5% yield, $2,000 invested in AbbVie will generate $70 in annual dividends.
Not just consistent with dividends, these stocks also possess robust business structures and have demonstrated a long-term commitment to rewarding investors with substantial returns.
Verizon
Telecommunications leader Verizon provides investors with a consistent, sustainable 6.5% dividend return, equating to approximately $2.71 per share on an annual basis. This yield is underpinned by robust business foundations. Moreover, the company has increased its dividend payments for an impressive 18 years in a row.
Verizon’s impressive financial performance emphasizes the reliability of its dividend strategy. In the first quarter of fiscal year 2025 (ending March 31), the company recorded an all-time high quarterly EBITDA of $12.6 billion, adjusted for interest, taxes, depreciation, and amortization. The free cash flow amounted to $3.6 billion. Given that the dividend payout ratio is 64.2%, the earnings generated are sufficient to meet the dividend obligations.
The company’s approach of combining its wireless and wired networks (such as 5G and fiber-optic), referred to as their convergence strategy, has been effective. This integration has led to a significant decrease in customer defection, ranging from 40% to 50%, for both mobile and fiber services. Having a loyal customer base results in steady income streams.
In addition to keeping their current clients, the company is also actively gaining new ones. For instance, Verizon added approximately 339,000 broadband customers and 308,000 fixed wireless customers during the first quarter. The goal for the company is to reach 100 million premises equipped with fiber and fixed wireless access after completing its upcoming acquisition of Frontier.
In addition to telecom services, Verizon has developed a substantial auxiliary business offering discounted streaming platforms, insurance policies, and financial services. By the close of 2025, this business is projected to generate an annual revenue of $2 billion. This business segment also maintains profit margins in the mid-30% range.
In simpler terms, the management aims to achieve a growth rate of between 2% and 3.5%, specifically with regards to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), when adjusted. Furthermore, they anticipate generating free cash flows ranging from $17.5 billion to $18.5 billion in the year 2025. This projected growth ensures a comfortable margin for maintaining dividend payments over time.
In other words, if you’re an investor looking to generate passive income from reliable corporations, Verizon seems like a shrewd choice at the moment.
AT&T
In simpler terms, AT&T, a major player in telecommunications, presents an attractive return of 4.1%, amounting to about $1.11 per share on an annual basis. The dividend seems secure, given its relatively low payout ratio of 68.1%, suggesting that the company could potentially boost this dividend in the future. Moreover, AT&T plans to restart their share buyback program in the second quarter of fiscal year 2025 as part of a $10 billion repurchase plan, with at least $3 billion expected to be completed by the end of fiscal year 2025, and the remaining amount earmarked for fiscal year 2026.
Over the past few years, AT&T has been placing more emphasis on fiscal prudence. Since 2020, they have managed to decrease their net debt by a significant $32 billion. As of Q1 fiscal 2025, their net debt-to-adjusted EBITDA ratio stood at 2.63, lower than the 2.68 ratio recorded at the end of fiscal 2024. In the same quarter, revenues grew by 2% to reach $30.6 billion, net income increased by 23.6% year on year to $4.7 billion, and free cash flow saw a 10.7% rise year on year to $3.1 billion. These figures show that AT&T can continue its dividend policy without strain while still having enough financial agility to invest in growth opportunities and buy back shares.
As an avid tech enthusiast, I’m thrilled to share that AT&T boasts impressive fiber and wireless operations, which are remarkably resilient even in economic downturns. Currently, the company is managing the largest fiber network within the U.S., aiming to reach 30 million fiber locations by mid-2025 and a whopping 50 million by 2029. The ongoing expansion has already ignited remarkable customer growth, with an impressive 261,000 new fiber connections in just Q1 this year! Moreover, the company’s efforts to modernize its wireless network and expand fixed wireless services have led to a significant increase of 181,000 customers during Q1. This just goes to show that AT&T is not only keeping pace with technological advancements but also staying ahead of the game in terms of customer acquisition!
By combining their services, AT&T is enhancing its customer relationships, making them more loyal and lucrative. It’s found that AT&T Fiber and mobile customers yield a 15% greater long-term value compared to those who use just one service.
As an onlooker, I find this evolving telecommunications company enticing for income-focused investors who prioritize defensive and growing dividends.
AbbVie
Apart from its shares, AbbVie boasts a substantial return of 3.52%, giving out an annual payment of $6.56 per share. With a remarkable record of raising dividends for 53 years in a row (dating back to its days as Abbott Laboratories), AbbVie holds the esteemed title of being a Dividend King.
In 2023, when the patent protection for AbbVie’s top-selling immunology drug, Humira, expired, some investors worried about the longevity of the company’s dividend strategy. Yet, AbbVie has managed to lessen its excessive dependence on Humira and remains prosperous even after facing the so-called patent cliff.
In Q1 of fiscal year 2025, Humira’s sales dropped by over 49.5% compared to the same period last year, amounting to $1.1 billion. On a brighter note, the emerging immunology drugs Skyrizi and Rinvoq have been performing exceptionally well, accumulating a combined total of $5.1 billion – a significant 65% increase from the previous year. The company’s forecast now predicts these two drugs to generate an impressive $31 billion in sales by 2027, potentially surpassing Humira’s all-time high sales of $20.7 billion.
Beyond specializing in immunology, AbbVie has also thrived in fields like neuroscience, oncology, and aesthetics. The company is actively pursuing strategic ventures, such as a $350 million collaboration with Gubra on obesity research and plans for a $2.1 billion buyout of Capstan Therapeutics, a CAR-T therapy developer. These transactions are intended to place AbbVie in lucrative, rapidly expanding sectors.
Lately, AbbVie disclosed that the costs associated with ongoing research and development (R&D) they recently acquired, as well as certain milestone expenses, have led to a downward adjustment in their projected earnings for the second quarter. Although these developments pose a temporary hurdle, these deals could potentially serve as significant catalysts for growth in the future.
Given AbbVie’s demonstrated ability to manage significant patent expirations successfully while increasing its dividends, it seems a wise choice for investment consideration in the year 2025.
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2025-07-19 14:44