Verizon has struggled to grow over the past 10 years.
The company's big bets on building a media division didn't pay off.
The telecom giant has still managed to continue growing its high-yielding dividend.
Verizon (NYSE: VZ) is one of the biggest names in the telecom sector. It's also a popular stock among income-seeking investors because of its generous dividend, currently offering more than a 6% yield.
Here's a look at how much money you'd have today if you'd invested $10,000 in Verizon stock a decade ago.
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Verizon's stock price has bounced around quite a bit over the past decade. Shares currently sit about 5% below their trading price 10 years ago. As a result, a $10,000 investment would now be worth only $9,535.
However, Verizon has continued to pay a lucrative and steadily rising dividend, with an industry-leading 18 consecutive years of dividend increases. That has helped boost its total return. By adding that dividend income and assuming dividend reinvestment, Verizon's total return has grown to more than 60%. As a result, a $10,000 investment would be worth about $16,030 today. Unfortunately, that would have still vastly underperformed an S&P 500 index fund. For example, a $10,000 investment in a top S&P 500 ETF, such as the Vanguard S&P 500 ETF, would have grown to more than $38,800 today.
Verizon's lackluster returns boil down to its lack of growth. The telecom giant's revenue and earnings are currently growing at a low- to mid-single-digit rate. That's a lot slower than other companies. While Verizon has taken steps to accelerate its growth by making acquisitions, they haven't always panned out. For example, it bought former internet giants AOL, for $4.4 billion in 2015, and Yahoo!, for $4.5 billion in 2017, to build a media business, only to sell that entire division for $5 billion in 2021. Verizon has also faced intense competition from other mobile and broadband carriers.
The telecom giant is working to restart its growth engine by focusing on investing in 5G and fiber. Unless its growth rate significantly accelerates, Verizon probably won't produce market-beating total returns in the future. However, Verizon does pay an attractive dividend, making it an appealing option for those who value income over growth.
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Matt DiLallo has positions in Verizon Communications. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.