Motley Fool: Can You Hear Me Now?

Shares of telecom giant Verizon Communications (NYSE: VZ) were recently down more than 30% from their high point over the past year, pushing the company’s dividend yield up to a fat 6.8%.

Verizon has an excellent dividend track record. The company recently increased its quarterly dividend payment by 2%.

That marked the company’s 16th straight year of increasing its dividend, the longest in the U.S. telecom industry.

The company has plenty of cash to cover its big-time payout.

Verizon’s business generated $28.2 billion of cash from operations during the first nine months of 2022, more than covering the $15.8 billion it invested in maintaining and expanding its network.

That left it with $12.4 billion of free cash flow, allowing it to fund its $8.1 billion dividend outlay and strengthen its solid balance sheet.

The company expects its network investments to drive future growth, which should enable it to continue increasing the dividend.

Verizon is big – recently its market value topped $160 billion – and it may not be a fast grower.

Still, its shares are appealingly priced, with a recent price-to-earnings (P/E) ratio of 8.3, well below the five-year average of 11.2.

Long-term investors seeking income should give the stock some consideration. (The Motley Fool has recommended Verizon Communications.)

Ask the Fool

Q. What does it mean to recast a mortgage? – C.F., Horace, N.D.

A. Recasting, also called reamortizing, can be handy if you suddenly have a large lump sum you’d like to pay toward your mortgage.

It involves your lender recalculating and lowering your monthly payments due to the smaller loan balance. Recasting generally doesn’t cost too much, and it will save you in overall interest paid, but it doesn’t change your interest rate or the terms of the loan.

Depending on the circumstances, you might also consider refinancing your loan – having your loan paid off with a new loan.

This does cost more, but it might get you a lower interest rate, a shorter term and/or lower monthly payments. It can also save you a lot in interest.

You might also just apply your lump sum against your current balance, and do nothing else. Doing so will get your loan paid off sooner.

Q. Are growth stocks or value stocks better? – H.T., Waverly, Neb.

A. Neither is necessarily better, but certain kinds of investors might favor one or the other.

Younger or more risk-tolerant investors with long time horizons might want growth stocks – shares of companies whose revenue and/or earnings are increasing at a relatively rapid rate; these could (but might not) grow phenomenally over many years.

More risk-averse investors might prefer value stocks, which seem undervalued and thus present lower risk.

Note, though, that the terms aren’t mutually exclusive.

Ideally, you could find and invest in rapidly growing stocks with market values significantly below what they seem to be worth. That scenario offers the best of both worlds.

My Dumbest Investment

My most regrettable investing move is not investing soon enough.

I should have opened an account at a brokerage and bought shares of an index fund sooner.

Lesson learned: I should be more proactive. You’re not going to achieve your financial goals with just a savings account, and 401(k) investment choices can be limited. – M.D., online

The Fool responds: You’re absolutely right.

Many of us should have started saving and investing years earlier, if not a decade or two earlier.

But we should look forward, not back, and think about what we can do now.

If you’re now saving and investing, that’s terrific.

Take some time to make sure you’re doing so at a rate that can get you to the nest egg you need for retirement.

It’s important to invest effectively, too, and as you noted, when interest rates are relatively low, savings accounts aren’t likely to help your money grow very quickly.

Don’t count out 401(k) accounts, though.

They do tend to have limited menus of investments to choose from, but these days, they’re more and more likely to offer one or more index funds, such as one that tracks the S&P 500.

And a 401(k) account offers tax breaks – a traditional version can reduce your taxable income for the year, and a Roth 401(k) permits tax-free withdrawals in the future.