Phone company Verizon Communications Inc. on Thursday said it is hiking its quarterly dividend by 1.25 cents, or 2.6 percent, to 50 cents per share.
It's the fifth straight year Verizon has raised its dividend in September. Last year's raise was also by 1.25 cents.
The dividend will be paid Nov. 1 to shareholders on record as of Oct. 7. New York-based Verizon's shares were down 1 cents to $36.15 in afternoon trading, giving it an annual dividend yield of 5.5 percent.
Analysts had for a few years been questioning Verizon's ability to maintain its dividend, given that nearly all of its cash flow comes from Verizon Wireless, which is 45 percent owned by Vodafone Group. For years, Verizon Wireless has been using its cash to pay down debt rather than paying a dividend to its parent companies, depriving them of cash. Analysts interpreted this as a way for Verizon to put the squeeze on Vodafone to encourage it to sell its interest to Verizon.
But Verizon Wireless announced a change to that strategy in July, saying it will pay a dividend of $10 billion to its two owners in January. The $5.5 billion Verizon will receive very nearly covers the company's $5.6 billion annual dividend commitment, at the new rate.
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