History says September could be the perfect time to pounce on this ultra-high-yielding dividend stock

After experiencing sharp declines in 2022, equity markets have shown unparalleled resilience over the past 20 months. From January 2023, S&P 500 and Nasdaq Composite they boasted total returns of 48% and 66% respectively (as of the time of this article). While it may be tempting to let the good times pass, savvy investors know that now may be a good time to take some gains off the table and look for more reliable opportunities.

Why is that? Well, September is generally a weak month in the stock market — one that is marked by strong selling activity. There are many factors influencing the selloff of stocks toward the end of the year, including fiscal planning or potential changes in monetary policy from the Federal Reserve. However, 2024 has another variable: the upcoming presidential election. The common theme among these articles is that widespread unpredictability on a number of important topics can lead to abnormal levels of market selling.

For these reasons, investors may want to consider opting for more predictable opportunities over volatile growth stocks. A good example of this would be to allocate a portion of your portfolio to consistent dividend stocks. Below, I’ll share an ultra-high-yielding dividend stock that I think should be on your radar, and explain why September might be the perfect time to pick up shares for this particular player.

This telecom stock stands out for one important reason

I will admit right off the bat that the telecom industry is not as exciting as other tech opportunities. The telecommunications business offers a core set of products and services, ultimately forcing major players to compete for customers on price. This dynamic can affect growth, which often leaves investors uninspired.

However, I see things differently Verizon (See -3.60%) — and history suggests September could be the perfect time to buy, especially for those looking for passive income.

The chart below illustrates that Verizon has increased its dividend for 17 consecutive years. But what? Many other companies raise their dividends every year.

While that’s true, Verizon tends to announce increases to its quarterly dividend in September.

Image source: Verizon Investor Relations.

Why Verizon Could Raise Its Dividend Again

It is interesting to spot a pattern regarding the timing of Verizon’s dividend increases. However, smart investors know that historical performance does not guarantee future results. A careful evaluation of Verizon’s recent stock trading activity, combined with a thorough analysis of its financial position, will help us determine whether or not a future dividend increase seems likely.

The table below shows Verizon’s revenue and free cash flow growth over the past several years. Clearly, there have been some inconsistencies in Verizon’s growth.

Data source: Verizon Investor Relations

While the trends above can drive you crazy, it’s important to zoom out and look at the big picture. The company has consistently generated plenty of cash flow, and even in years when its growth slowed, it still managed to sustain its dividend and increase it.

In the first six months of 2024, Verizon generated $65.8 billion in total revenue. Considering that’s only about 0.5% year-over-year growth, you might think the rest of Verizon’s financial profile is just as uninspiring. However, despite this trivial level of top-line acceleration, Verizon has done a respectable job growing its profitability. For the six months ended June 30, Verizon generated $8.5 billion in free cash flow — up 6.9% year over year.

In my eyes, Verizon’s dividend looks safe right now.

Should You Buy Verizon Stock Right Now?

Right now, Verizon stock boasts an ultra-high 6.2% dividend yield. By comparison, the SPDR S&P 500 ETF Trust it has a dividend yield of only 1.2%. Moreover, Verizon’s forward price-to-earnings (P/E) multiple of 9.4 is considerably behind the S&P 500’s forward P/E of 22.4. While a future dividend increase is speculation on my part, recent increases in Verizon stock might suggest that I’m not alone in anticipating that the company will continue to reward shareholders and announce a dividend increase soon.

Historical trends suggest that a prolonged market selloff may be imminent, so I encourage investors to look for more isolated opportunities. Given Verizon’s consistent ability to generate cash flow, combined with its historical tendency to announce dividend increases in September and its notable discount to the broader market’s valuation, I think now is a great time to pull and earn shares.