When Verizon Communications Inc. (NYSE:VZ) announced plans to acquire Frontier Communications Parent, Inc. (NASDAQ:FYBR) in September for $20 billion, some investors were likely eyeing potential gains from the company's dividends.
As of now, Verizon offers an annual dividend yield of 6.02%. That's a quarterly dividend of 67.75 cents per share ($2.71 a year).
So, how can investors exploit its dividend yield to pocket a regular $500 monthly?
To earn $500 per month or $6,000 annually from dividends alone, you would need an investment of approximately $99,741 or around 2,214 shares. For a more modest $100 per month or $1,200 per year, you would need $19,957 or around 443 shares.
To calculate: Divide the desired annual income ($6,000 or $1,200) by the dividend ($2.71 in this case). So, $6,000 / $2.71 = 2,214 ($500 per month), and $1,200 / $2.71 = 443 shares ($100 per month).
Note that dividend yield can change on a rolling basis, as the dividend payment and the stock price both fluctuate over time.
How that works: The dividend yield is computed by dividing the annual dividend payment by the stock's current price.
For example, if a stock pays an annual dividend of $2 and is currently priced at $50, the dividend yield would be 4% ($2/$50). However, if the stock price increases to $60, the dividend yield drops to 3.33% ($2/$60). Conversely, if the stock price falls to $40, the dividend yield rises to 5% ($2/$40).
Similarly, changes in the dividend payment can impact the yield. If a company increases its dividend, the yield will also increase, provided the stock price stays the same. Conversely, if the dividend payment decreases, so will the yield.
Price Action: Shares of Verizon fell 0.4% to close at $45.05 on Wednesday.
On Oct. 1, Tigress Financial analyst Ivan Feinseth maintained Verizon with a Buy rating and raised the price target from $52 to $55.
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- Wall Street's Most Accurate Analysts Give Their Take On 3 Consumer Stocks Delivering High-Dividend Yields
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