Better Dividend Stock: AT&T vs. Verizon

AT&T (NYSE: T) and Verizon (NYSE: VZ), two of the largest telecom companies in America, are both often considered stable income stocks. But over the past three years, AT&T's stock rallied nearly 50%, as Verizon's stock declined 5%. After reinvesting their dividends, AT&T delivered a total return of more than 75%, as Verizon generated a total return of just 15%.

Let's see why AT&T outperformed Verizon by such a wide margin, and if it's still the more reliable dividend play today.

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The differences between AT&T and Verizon

AT&T and Verizon both generate most of their revenue from their wireless businesses. At the end of the first quarter of 2025, AT&T and Verizon served 118 million and 146 million wireless (both postpaid and prepaid) subscribers, respectively.

Image source: Getty Images.

AT&T grew its wireless postpaid business by 1.7 million subscribers in 2023, 1.7 million subscribers in 2024, and another 324,000 subscribers in the first quarter of 2025.

AT&T spun off DirecTV, Time Warner, and its smaller media assets over the past few years to focus on expanding its 5G wireless and fiber businesses. That back-to-basics approach sharpened its competitive edge and freed up a lot of cash. Its fiber business also added 1.1 million connections in 2023, another 1 million connections in 2024, and 261,000 connections in the first quarter of 2025.

The rapid growth of its 5G and fiber segment offset the softness of its business wireline segment, which is still struggling to stay relevant as more businesses transition from wired network connections toward cloud and wireless services.

Verizon's wireless business gained 286,000 postpaid subscribers in 2023 and 731,000 subscribers in 2024 -- but it abruptly lost 289,000 subscribers in the first quarter of 2025.

Verizon attributed that decline to tough competition and big promotions at AT&T and T-Mobile. The company tried to keep up by slashing its prices and offering more competitive bundles, but it hiked its prices again at the beginning of 2025 to boost its subscriber revenues. That move, along with the recent federal layoffs, exacerbated Verizon's loss of wireless subscribers.

Like AT&T, Verizon expanded its broadband internet segment by adding 248,000 Fios subscribers in 2023, another 208,000 subscribers in 2024, and 45,000 subscribers in the first quarter of 2025. However, that segment still isn't growing fast enough to offset its loss of wireless subscribers or the ongoing decline of its business wireline segment.

Which company has a healthier dividend?

AT&T pays a forward dividend yield of 4%, while Verizon pays a higher forward yield of 6.3%. However, AT&T's yield declined as its stock rallied, while Verizon's yield rose as its stock fell. AT&T nearly halved its dividend in 2022, after it spun off WarnerMedia and merged it with Discovery to create Warner Bros. Discovery. It hasn't raised its dividend since then. Verizon has raised its dividend annually for 18 consecutive years.

We can gauge the health of a company's dividend with its cash dividend payout ratio, or the percentage of its free cash flow (FCF) it pays out as dividends. Verizon has a higher ratio, but both companies can easily afford to raise their dividends.

Source: YCharts

In 2024, Verizon's FCF rose 6% to $19.8 billion, but it expects that figure to dip to $17.5 billion-$18.5 billion this year. AT&T's FCF grew 5% to $17.6 billion in 2024, but it also anticipates a decline to about $16 billion in 2025.

Both companies expect their increased 5G and fiber investments, along with higher tax rates, to throttle their near-term FCF growth, but AT&T's FCF decline will be exacerbated by the planned sale of its remaining 70% stake in DirecTV this year.

But which company has a brighter future?

For 2025, AT&T expects its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to rise at least 3%. Verizon expects 2%-3.5% growth. With an enterprise value of $312 billion, AT&T trades at 6.8 times this year's adjusted EBITDA. Verizon, which is worth $318 billion, trades at 6.4 times this year's adjusted EBITDA.

Verizon is the cheaper stock with the higher dividend, but its wireless business faces tougher near-term challenges than AT&T's. That means a lot of its near-term earnings growth could be driven by cost-cutting measures and price hikes instead of new subscribers. So unless Verizon can start gaining more wireless postpaid subscribers, it could continue to underperform AT&T.

The better buy: AT&T

Verizon's downside might be limited at these levels, but AT&T's stronger wireless growth makes it the better dividend stock right now -- even though it pays a lower yield and hasn't raised its payout since its spinoff of Warner Bros. Discovery. However, I might change my mind if Verizon gets its act together and finds more ways to grow in this tough promotional environment.

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Leo Sun has positions in Verizon Communications. The Motley Fool has positions in and recommends Warner Bros. Discovery. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.