Verizon's Share Price Is Lower Than It Was 5 Years Ago. With Dividends Reinvested, You're Up About 24%.

On the Friday before Labor Day weekend in 2021, shares of Verizon Communications (NYSE:VZ) closed at $55.43. This past Friday, five years later almost to the day, they closed at $50.14 -- a decline of about 9.5%.

But with a dividend stock like this one, price is only half the story. Add in the dividends, each payment reinvested in more shares, and the same five years produced a total return of about 24%.

The entire gap is the dividend. What the payout did over the last five years, it can probably do again. The share price is the half that has to change.

Image source: Verizon.

The dividend did all the work

An investor who bought at that 2021 close collected 20 quarterly dividend payments over the following five years -- about $13.30 per share. That comes to about a quarter of the original purchase price paid back in cash.

Even an investor who spent every check came out ahead. The dividends were more than double the $5.29-per-share price decline, for a total return of about 15%. Reinvesting each payment (mostly at prices below the 2021 close) pushed the figure to about 24%.

The payout itself kept growing along the way, too. The quarterly dividend was $0.64 per share in the fall of 2021. Today it's $0.7075, about 11% higher, after a 2.5% increase in January marked Verizon's 20th consecutive year of raises.

Twenty raises and counting

Of course, a return built on dividends only repeats if the payments keep coming. Verizon generated $20.1 billion of free cash flow in 2025, up from $19.8 billion in 2024. And management has twice this year raised its full-year outlook. Free cash flow growth is now forecast at 9% to 10%, up from about 7% in January.

Hit that target, and free cash flow lands near $22 billion. The dividend costs about $11.7 billion a year, so the payout would be covered nearly twice over. That leaves room for the $25 billion share repurchase program the board authorized in January. Verizon bought back $3.5 billion of stock in the first half of the year alone.

Sure, Verizon still carries a lot of debt, with net unsecured debt of $128.7 billion as of June 30, or 2.5 times its adjusted earnings before interest, taxes, depreciation, and amortization. But against the cash the business generates, the payout doesn't look stretched.

This time, earnings have to grow

The five-year price decline was never about the market souring on Verizon. The company earned $5.39 per share on a non-GAAP (adjusted) basis in 2021, and the stock's $55.43 close was about 10 times those earnings. Today's price works out to about 10 times the adjusted earnings management expects for 2026.

The price-to-earnings multiple, in other words, barely moved. What shrank was the earnings. Adjusted earnings per share fell to $4.71 last year, and guidance calls for $4.99 to $5.04 this year -- growth of 6% to 7%, but still short of the 2021 figure.

The next five years look different only if that earnings growth continues. And for the first time in a while, I think there's a concrete case.

Verizon closed its acquisition of Frontier Communications in January, expanding its fiber network to about 30 million homes and businesses passed. In the second quarter, mobility and broadband service revenue grew 2.8% year over year, and the business segment's revenue climbed 2.6%.

"Our 2026 guidance reflects the beginning of our turnaround, and is a step function change from our past five-year historical average," said CEO Dan Schulman in the company's fourth-quarter 2025 earnings release.

However, not everything has turned. Even with Frontier included, second-quarter operating revenue slipped 0.7% year over year, as a nearly 20% drop in equipment revenue outweighed the growth in service revenue.

Does that make the last five years a mistake for shareholders? I don't think so. A 24% total return landed well behind the broader market, but it wasn't the loss the chart implies, and the income arrived every quarter.

Ultimately, I'd still buy the stock today, for the same reason the last five years turned out better than they looked: the dividend. At Friday's close, the yield is about 5.6%, and this year's guided free cash flow covers the payout nearly twice over.

For the share price to do better, adjusted earnings per share has to keep growing beyond 2026. The dividend should keep doing its job either way.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.