Better Dividend Stock: AT&T vs. Verizon

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.

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.

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.

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.

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.

Better Dividend Stock: AT&T vs. Verizon was originally published by The Motley Fool