Motley Fool: Investors could call Verizon
If you’re seeking income, consider telecom giant Verizon Communications (NYSE: VZ).
Its dividend, recently yielding a fat 6.8%, was increased by around 2% last September. That was its 17th straight year of dividend growth, the longest current streak in the U.S. telecom sector. (Rival AT&T, meanwhile, reduced its dividend by nearly half in 2022.)
Verizon does face some challenges, such as debt. In 2014, it acquired Vodafone’s stake in Verizon Wireless for a whopping $130 billion, and at the end of March , Verizon still carried $128 billion in unsecured debt.
A large (and slowly shrinking) pile of debt consumes much of Verizon’s cash flow, leaving little room for new investments or dividend raises. Indeed, in 2023, Verizon used 85% of its free cash flow to meet its dividend obligation.
That didn’t leave much cash to reduce its debt load or invest in its future. If earnings continue to contract or stagnate, the company might have to reduce its payout.
On the plus side, Verizon has been investing heavily in its 5G and broadband networks.
In its first quarter, it gained 389,000 broadband subscribers and 90,000 business phone subscribers. And its high-profit-margin wireless service revenue was up 3.3% to $19.5 billion.
If you’re looking for a fast-growing stock, look elsewhere. But those seeking income should consider this big payer. (The Motley Fool has recommended Verizon Communications.)
My Dumbest Investment
My most regrettable investing move was paying a load commission on a mutual fund.
I’d been working for a few years and had some money saved up. I wanted to put it in the best mutual fund.
I did some research and found a fund company with good recent performance. But it didn’t sell directly to consumers – only through financial advisers, and only with a load charge.
So I got a financial adviser for the sole purpose of paying their commission in order to get into those funds.
And of course, that good performance didn’t continue. I should have known better.
I’m a statistician with a Ph.D.! But I didn’t appreciate just how random individual funds and individual stocks are. Good results for a few years don’t predict future performance. Now I buy the lowest-fee index funds that I can. – T.H., via email
The Fool responds: Mutual funds come in load and no-load varieties, and sticking with no-load funds is often the best thing to do.
A “load,” as you note, is a sales commission, and most top out around 3%, though some can be much higher.
If you invest $10,000 and pay a 3% load fee, you’re handing a salesperson $300.
You did well to notice that the past performance of funds (and stocks) doesn’t necessarily reflect future performance. Much depends on who is managing a fund and how well their chosen investments perform.
Ask the Fool
Q. Is commodity investing really so risky? – N.W., New Orleans
A. Yup. The U.S. Commodity Futures Trading Commission itself offers a stark warning: “Only trade with ‘risk capital.’ This is money you can afford to lose … research has shown that after commissions, the majority of individual speculators lose money.”
Investing in commodities involves agreeing (often via futures contracts) to buy or sell a certain amount of a raw material or agricultural product – such as gold, silver, crude oil, cattle, cotton, lumber, sugar, coffee, corn or wheat – at a specific price on a specific date.
These agreements can easily end unprofitably for you due to factors including supply and demand issues, geopolitical events or the global economy.
We prefer just buying into healthy and growing companies and aiming to hang on for many years. It’s a much more dependable way to build wealth, and it can help you sleep better.
You might be drawn to commodities because you can often invest in them by putting little down. This leverage can amplify your gains, but it also amplifies losses – possibly catastrophically.
Q. Where can I learn about college scholarships and financial aid? – M.N., Kinston, North Carolina
A. You’re smart to look into financial aid, because there’s a lot of it available.
Perhaps start learning about colleges and scholarships at BigFuture.CollegeBoard.org.
Other good scholarship sites include Scholarships.com, Fastweb.com, GoingMerry.com, ScholarshipOwl.com and Bold.org. (Note that there are some scholarship scams out there, and you shouldn’t have to pay to look up any scholarships.)
Be sure to read up on financial aid and the all-important Free Application for Federal Student Aid (FAFSA) format sites, such as FinAid.org. Your high school might have info on local scholarships, too.