For the first time in six years, Verizon Wireless on Thursday announced a dividend payment and it was a whopper of a payout: $10 billion.
Basking Ridge, N.J.-based Verizon Wireless said the dividend is payable on Jan. 31, 2012.
The news appeased shareholders of Vodafone Group Plc, the England-based mobile-phone behemoth with a 45 percent interest in the largest U.S. wireless operator (106.3 million wireless connections). Shares in Vodafone climbed the most in four months in London trading following the announcement, according to Bloomberg. Vodafone’s share of the dividend is $4.5 billion.
Our long term partnership in Verizons strong and successful wireless business has seen the value of our investment increase significantly over recent years,” Vodafone Chief Executive Vittorio Colao said in a statement. The dividend from Verizon Wireless allows us not only to reward our own shareholders with an immediate and sizeable cash return, but also to continue to reinvest in our business to improve our customers experience, further strengthen our competitive position and create additional value for shareholders.”
Verizon Wireless is a cash cow for its majority owner, Verizon Communications. In the second quarter, wireless revenues climbed 10.2 percent to $17.3 billion while Verizon Wireless posted operating income of $4.69 billion. Last year, the wireless company brought home $18.7 billion in operating income on annual revenues of $63.4 billion.
Verizon Corporation generates very little cash (if any) from its wire line business, and has until now funded its dividend with the repayment by Verizon Wireless of loans made to it by Verizon Communications, now expired,” The New York Times quoted Bernstein analysts as writing. With intercompany loans exhausted and Verizon Wireless now essentially debt free, Verizon Communications has no other means by which to pay its corporate dividend leaving little option but a dividend for the cash.”