Better Dividend Stock: Verizon vs. American Express | The Motley Fool

Investors looking for ways to boost their passive income stream recently saw encouraging results from a pair of well-established dividend payers. Verizon (VZ -0.26%) raised earnings guidance for the last half of 2025, and American Express (AXP 1.50%) delivered second-quarter revenue that set a new record.

However, it takes more than one encouraging quarterly earnings report to make a great dividend stock. Here’s a look at the road ahead of these businesses to see which is likely to deliver the most income to your brokerage account.

Verizon

Last September, Verizon raised its dividend payout for the 18th year in a row. At recent prices, shares of America’s largest telecommunications giant offer an attractive 6.3% dividend yield.

Verizon’s payout raises have been consistent, but they haven’t been anything to write home about. The quarterly payment is up by just 19.9% over the past 10 years.

Verizon’s wireless phone business isn’t growing fast, but broadband is picking up the slack. Second-quarter wireless service revenue rose just 2.2% year over year, but the company expanded total broadband connections by 12.2% year over year to 12.9 million.

While revenue isn’t growing very fast, the array of new tax reforms will make meeting and raising its payout a little easier. At the midpoint of management’s guided range, free cash flow is expected to reach $4.74 per share in 2025. That’s more than enough to meet and raise a dividend obligation currently set at $2.71 annually.

American Express

American Express doesn’t raise its payout as frequently as Verizon. It makes up for its lack of consistency, though, with rapid payout bumps when the time is right.

At recent prices, the credit card network operator offers a minuscule 1.1% yield. This is much lower than Verizon, but rapid payout raises could lead to a higher yield on cost down the road.

Earlier this year, American Express raised its dividend payout by 17%. Over the past 10 years, the payout has soared 183%.

Another global pandemic could lead American Express to pause payout raises, but investors can still expect heaps of profits to come their way in the form of share repurchases. American Express has lowered its share count by 29.4% over the past decade. This makes future payout raises, like the big 17% bump we saw recently, relatively easy to manage.

AXP Dividend data by YCharts

As one of just four global credit card payment networks, steady growth from American Express is a reasonable expectation. Credit card network fees are annoying, but they’re hardly high enough to make using cryptocurrency for everyday purchases an economically sensible option. If this changes, American Express and the other three established networks can easily compete by reducing swipe fees.

American Express recently took a big step toward cementing its competitive position in a shifting cryptocurrency landscape. In June, management announced that the Coinbase One Card will launch on the American Express network.

The better dividend stock to buy now

Choosing the better stock among these two will depend on your time horizon. The dividend growth rate American Express reported over the past decade is outstanding, but the stock offers a very low yield at the moment. If we project the past decade’s dividend growth rate forward, investors who begin an American Express position now would receive a yield on cost of around 3.6% in 2045.

Verizon’s yield is growing slowly, but investors who don’t have more than a few decades to wait around are probably better off with the high-yield telecom stock. Its payout is growing slowly, and the recent cash acquisition of Frontier Communications for $20 billion means the next few payout raises probably won’t be large ones.

If we project Verizon’s past decade of dividend payout raises forward, investors who start a position now could receive a 9.1% yield on cost in 2045. That makes it a better buy for most income-seeking investors.