Will the Verizon Strike Hurt Your Dividends?
If you have a service call pending with Verizon (NYS: VZ) somewhere in the Northeast, I hope it's not too urgent. Forty-five thousand workers just went on strike in that region.
At issue from the union's point view is 50 years of collective contract improvements. From Verizon's perspective, it's about the right to make cuts in a workforce that's undeniably on the outs. The two sides reportedly sit "far apart" on many issues, and this strike could last awhile.
For example, the unions are not interested in a contract modeled after "private, nonunion, low-wage jobs," Communications Workers of America Director Bob Master says. But Verizon counters that field technicians are very well paid and enjoy a generous benefits package to boot -- shouldn't the company be allowed to tie raises to job performance and get some help with those expensive health-plan premiums? Oh, and a couple of holidays the union enjoys seem unnecessary, too.
The CWA has set aside $400 million in a contingency fund while Verizon brought in "tens of thousands" of non-union workers to replace the picketers, according to The Wall Street Journal. This could get ugly.
From where I sit, both sides are making some good points. The only reasonable solution here is a massive tangle of concessions from unions and Big Red alike, and it'll take ages to work this out. And the outcome here will set the tone for union negotiations across the industry. Many of these companies are stellar dividend payers, and revamped union relations could force changes to those payout policies.
So if you're invested in AT&T (NYS: T) , CenturyLink (NYS: CTL) , or Windstream (NAS: WIN) , you'd better keep your finger on this strike just as much as any Verizon investor would. The same goes for Sprint Nextel (NYS: S) and Frontier Communications (NYS: FTR) , and perhaps less obviously for LM Ericsson (NAS: ERIC) , which handles network installation and management for Sprint and others.
At the time this article was published Fool contributorAnders Bylundholds no position in any of the companies discussed here.Motley Fool newsletter serviceshave recommended buying shares of AT&T. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. You can check outAnders' holdings and a concise bio, follow him onTwitterorGoogle+, or peruseour Foolish disclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.