Could Starting With $50K In Verizon Make You A Dividend Millionaire In 10 Years?

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Warren Buffett’s legendary success as an investor owes much to a straightforward yet powerful approach: dividend reinvestment programs (DRIP). This strategy harnesses the power of compounding by reinvesting dividends into the stock, creating a virtuous growth cycle over time.

For long-term investors looking to capitalize on this approach, Verizon Communications Inc. (NYSE:VZ) is an excellent candidate. With its strong dividend yield and steady growth potential, Verizon offers a compelling path to building substantial wealth over the next decade. Verizon currently has a dividend yield of 6.49% and an annual payout of $2.66.

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Why Verizon?

Verizon is one of the largest telecommunications companies in the United States, known for its reliable services and extensive network coverage. Despite operating in a highly competitive market, Verizon has consistently maintained its market share and continues to generate substantial revenue, making it a solid option for dividend-focused investors.

Verizon’s robust dividend yield makes it particularly attractive for income investors. The company has a long history of steady dividend payments. While its growth rate isn’t as aggressive as some tech giants, its stability and consistent cash flow make it a reliable choice for those looking to grow their wealth through dividends.

Projected Growth Over 10 Years

The table below illustrates how an initial investment of $50,000 in Verizon, supplemented by monthly contributions of $500, could get you close to $1 million by 2034, but it’s short of the $1 million target. This projection assumes the stock maintains its current dividend yield and an annual stock price growth rate of 5%. Also, remember the actual tax rate might vary depending on your tax bracket, state taxes, and any changes in tax laws.

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Recent Performance and Market Position

Verizon’s stock has fluctuated recently, largely due to broader market volatility and concerns about rising interest rates. However, the company’s strong dividend yield and stable business model make it a reliable income-generating asset. Verizon’s focus on expanding its 5G network and growing its subscriber base are key drivers for future growth, positioning the company well for long-term success.

In the second quarter, Verizon reported total wireless service revenue of $19.8 billion, a 3.5% increase year over year. Verizon ended the first half of 2024 with a free cash flow of $8.5 billion, up from $8 billion in the first half of 2023. The company’s ability to generate consistent cash flow and maintain its dividend payout ratio of around 50% ensures its attractiveness to dividend investors. “We’re seeing improving postpaid phone net adds in consumer, performing extremely well in business, and taking share in broadband,” said CEO Hans Vestberg on the earnings call. “We’re achieving growth in a disciplined, balanced way and have built great momentum heading into the second half of the year and into 2025.”

What The Market Thinks

Institutional investors have shown steady interest in Verizon, with notable investment firms such as Vanguard and BlackRock maintaining significant holdings in the company. In the first half of 2024, institutional ownership of Verizon remained strong, reflecting confidence in the company’s ability to continue delivering shareholder value through dividends.

Analysts have a mixed but cautiously optimistic view of Verizon, with a consensus of Neutral. Benzinga data shows that the last three analyst price targets forecast an upside of over 14%. While some have concerns about the company’s ability to sustain high levels of growth, others point to the potential benefit from the continued rollout of 5G services and the expansion into new revenue streams such as fixed wireless access and business solutions. KeyBanc Capital Markets analyst Brandon Nispel called Verizon’s broadband growth close to the best in the industry. The consensus suggests that Verizon will remain a steady performer, with its high dividend yield being a key attraction for income-focused investors.

High-Yield Alternatives for Diversification

While Verizon offers a solid path to becoming a dividend millionaire, it’s wise to consider diversifying your portfolio with high-yield alternative investments. Two options are the EquityMultiple Ascent Income Fund and the Arrived Private Credit Fund.

The Ascent Income Fund is designed to provide stable income through senior commercial real estate debt investments. With a historical distribution yield of 12.1%, this fund offers a reliable income stream backed by real assets. For investors seeking flexibility and security, the Ascent Income Fund is a solid addition to a dividend-focused portfolio.

Similarly, the Arrived Private Credit Fund allows investors to participate in short-term real estate financing, offering target annualized dividends of 7-9%. This fund is secured by quality residential real estate and provides quarterly liquidity, making it suitable for those looking to complement their equity investments with high-yield debt.

By investing in Verizon and leveraging the power of dividend reinvestment, alongside exploring high-yield alternatives like EquityMultiple’s Ascent Income Fund and Arrived Private Credit Fund, investors can build a diversified, income-generating portfolio. This strategy paves the way to becoming a dividend millionaire within the next decade and offers resilience against market fluctuations.

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