Investors seeking passive income are sometimes captivated by a stock or bond’s current yield (payout divided by price). Buying current cash flow is a significant objective of passive income investors. But some investments come with an opportunity to increase current yield over time.
What Are The Best Passive Income Investments
Perhaps some of the best passive income investments are those that can help you grow your cash flow for as long as you own them. Verizon Communications Inc. (NYSE: VZ) may be one of these.
Verizon was formed in 2000 when Bell Atlantic and GTE merged. Bell Atlantic had been one of the old “Baby Bells” created by the breakup of AT&T Corp back in 1984. In 2000, GTE was the largest independent phone company not affiliated with the former Bell System.
Today, Verizon is the largest wireless carrier in the North America. Its network covers about 70% of the United States.
One potential catalyst for Verizon’s future growth comes from its “5G Ultra-Wideband network.” According to Verizon, it can deliver speeds 10 times faster than the 4G LTE signal offered by its more than 100 regional competitors.
What Wall Street Thinks Of This Passive Income Investment
In general, analysts on Wall Street who follow Verizon stock have a positive opinion of it. The average price target among them is more than $44.00, or up some 11% from Verizon’s current price range.
The average rating among those analysts is about 2.3 on the 1 to 5 scale that firms adhere to when making recommendations. The vast majority of analyst recommendations on Verizon are either “Buy” or “Strong Buy” ratings.
There are a few analysts who recommend a “Hold” on Verizon. They point to three potential drags on earnings: high capital expenditures, heavy promotional spending, and big discounts offered to attract new customers.
The Opportunity Verizon Offers To Passive Income Investors
Verizon’s most recent financial filings reported revenues and earnings that were right in line with most analysts’ expectations. So spending money in the near term to grow its customer base does not appear to come at the expense of profitability.
In its most recent annual report, Verizon also stated that it is “focusing [its] capital investment on building [its] next generation 5G network, while also adding capacity and density to [its] 4G LTE network.”
Investing in capital equipment – especially when it is the core of your product offering – is generally one that reaps future dividends.
On the subject of dividends, it should be noted that Verizon has paid a quarterly dividend regularly since Bell Atlantic and GTE merged to create it in 2000. The payout has increased 17 times in the past 24 years.
The magnitude of those increases has been impressive. Verizon’s dividend payout has increased more than 71% since 2000.
Today, Verizon’s $2.66 annual dividend yields just about 6.7%. Given its track record of increases, Verizon may offer investors both current income and an opportunity for future cash flow increases. That might put Verizon up there with the some of the best kinds of passive income investments.
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