Verizon's Big Turnabout on Verizon Wireless Dividend
Verizon caught everyone off guard when it announced that Verizon Wireless, the venture it shares with U.K.-based telecom Vodafone , would be paying out $7 billion to its two partners.
Based on Verizon's 55% share and Vodafone's 45% share, the companies would receive $3.85 billion and $3.15 billion, respectively. The dividend will be disbursed on June 25, 2013.
The surprising thing about this payout is not that Verizon Wireless wasn't expected to be making a profit -- it's that previous remarks made by Verizon CEO Lowell McAdam to analysts at J.P. Morgan suggested that because of the desire to pay down Verizon Wireless' $5 billion in debt, the partners should not expect much return form their investments this year.
It was considered then that with the threat of leaner payouts perhaps McAdam wanted to put a bit more pressure on Vodafone to sell its share of Verizon Wireless to Verizon. There had been reports last month from both Reuters and Bloomberg that Verizon was preparing an offer of $100 billion for Vodafone's share but that Vodafone valued it at $130 billion.
But Verizon CFO Fran Shammo told an audience at a J. P. Morgan technology conference that McAdam's comments had been misunderstood. What McAdam said, according to Shammo, was that the dividend would be smaller than in the past.
From 2005 until 2012, Verizon had withheld paying out dividends from the profitable Verizon Wireless. In 2012, the piggy bank finally opened and Vodafone received $8 billion.
Verizon Wireless is, as one disappointed Vodafone investor has said, the best thing in the last 10 years of Vodafone's "collection of modest success and abject failures."
Shammo said his company would pay a dividend if there is nothing else that is needed to be done with it.
The article Verizon's Big Turnabout on Verizon Wireless Dividend originally appeared on Fool.com.Fool contributor Dan Radovskyhas no position in any stocks mentioned. The Motley Fool recommends Vodafone. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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