Key Points

  • Verizon's dividend yield is very generous.

  • It's also been growing steadily, though not briskly.

  • 10 stocks we like better than Verizon Communications ›

Verizon Communications (NYSE: VZ) is a blue chip stock worth considering -- especially if you're seeking dividend income. Its recent dividend yield was a fat 6%. Let's see how much income you might collect from the telecommunications giant.

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Imagine, for example, that you invest $500 a month in it, or $6,000 per year. The table below shows what your investment might grow to if it grows at 8% annually for various periods. I picked 8% to be a bit conservative; over many decades, the S&P 500 has averaged annual returns close to 10% (ignoring inflation).

Of course, Verizon stock hasn't been the fastest-growing over the long run, averaging just 2% annual gains over the past 15 years (with no dividend reinvestment). But over the past three years, it has averaged 13.3% gains annually.

Here's how your money might grow with 8% annual gains if you invest $6,000 annually ($500 per month) or if you can wing $12,000 annually:

As for dividend income, an initial $6,000 invested will generate $360 in year one. Over the past decade, Verizon's payout has grown at an average annual rate of about 2.3%. If that growth rate continues and the dividend yield remains constant (which is unlikely), in year two, with $12,000 invested, you'd collect around $742. In year three, $1,146. In year 10, you'd have $60,000 invested in Verizon, and you'd collect around $4,697 that year in dividends. Add the numbers over a decade, and it totals around $23,700 in dividend income!

Those numbers are based on several assumptions, but clearly, a long-term investment in Verizon Communications could pay off well.

Should you buy stock in Verizon Communications right now?

Before you buy stock in Verizon Communications, consider this:

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Selena Maranjian has positions in Verizon Communications. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.