Key Takeaways
- Verizon yields 6.8% after an 8.7% drop on Oct. 9 and British American Tobacco 6.1%, and their dividends grew 1.9% and 2.2% a year from fiscal 2020 to fiscal 2025.
- Verizon’s dividend used 54% of its free cash flow over the twelve months to June 30, 2026, against 78% at British American Tobacco.
- British American Tobacco’s free cash flow fell from £9.6 billion in fiscal 2024 to £5.8 billion in fiscal 2025, and its dividend took 91% of it that year.
- At their 5-year growth rates, $10,000 in Verizon would pay about $808 a year by year 10, against about $744 for British American Tobacco.
Any income investor hunting for a 6% yield is going to land on Verizon Communications (VZ) and British American Tobacco (BTI) sooner or later.
Verizon yields 6.8% after a second quarter of 2026 in which free cash flow came to $6.4 billion, up 24.4% on the second quarter of 2025. British American Tobacco, at a 6.1% yield, told investors on July 30 that earnings per share should land toward the middle of its 5% to 8% range this year.
With yields that close, which one is the better buy?
| Metric | Verizon (VZ) | British American Tobacco (BTI) |
|---|---|---|
| Dividend yield | 6.8% | 6.1% |
| Yield at the current dividend rate | 6.8% | 5.9% |
| Dividend growth, fiscal 2020–2025 | 1.9% a year | 2.2% a year (in pounds) |
| Dividend growth, fiscal 2015–2025 | 2.0% a year | 4.5% a year (in pounds) |
| Cash dividend payout ratio (TTM to June 30, 2026) | 54% | 78% |
| Net debt / EBITDA (LTM) | 3.35x | 2.88x |
| Interest coverage (LTM) | 4.36x | 5.2x |
Verizon has room to spare
Verizon’s dividend is well-covered, eating up 54% of free cash flow over the twelve months to June 30, 2026. That wasn’t always so: in fiscal 2016, free cash flow of $4.63 billion fell well short of $9.26 billion in dividends. By fiscal 2025, it was $20.1 billion against $11.5 billion paid out.
The business is growing where it counts. Mobility and broadband service revenue was $23.4 billion in the second quarter of 2026, up 2.8% on the second quarter of 2025. Management guides service revenue growth of 2.5% to 3.0% for 2026.
“We are growing our dividend, and we are paying down our debt,” management said on the July call, and the coverage backs up the first half. January’s raise was 2.5%, to $0.7075 a quarter, marking what management calls “the 20th consecutive year of dividend increases.”
The main risk is that debt. At 3.35x net debt to EBITDA, Verizon carries the heavier load of the two.
The newest is competition. SpaceX agreed on Oct. 8 to buy nationwide low-band spectrum for its Starlink phone service, and Verizon’s stock fell 8.7% the next day, which is why it now yields 6.8%. The deal still needs the FCC’s approval, and Verizon says spectrum alone “does not provide the network or infrastructure to offer true nationwide coverage.”
British American Tobacco’s cushion got thinner
Where Verizon’s coverage has held steady, British American Tobacco’s dividend runs on a tighter budget, using 78% of free cash flow over the twelve months to June 30, 2026. From fiscal 2021 to fiscal 2024, it took between 50% and 55%. Then free cash flow fell from £9.64 billion in fiscal 2024 to £5.79 billion in fiscal 2025, against £5.29 billion of dividends, a risky 91%.
Management expects the cash to come back. On the July 30 call, Syed Iqbal said the company’s focus on cash “makes me very confident that for the full year, we will be delivering another year of more than 95% cash conversion.” Chief Executive Tadeu Marroco pledged “our progressive dividend and sustainable share buyback.” A 78% payout leaves less room for both than Verizon’s 54% does.
The business is mixed. U.S. combustibles value grew 5% in the first half of 2026, though management puts about 2 points of that down to trade movements, and it guides new-category growth in the mid-teens for 2026.
British American Tobacco sets its dividend in pounds (£3.34 a share for fiscal 2025), so what a U.S. holder collects moves with the exchange rate. The main risk is illicit vapes undercutting its legal products.
So which dividend wins?
Verizon is the better high-yield dividend stock. Its dividend uses 54% of free cash flow over the twelve months to June 30, 2026, against British American Tobacco’s 78%, and its service revenue is growing. For a stock you own for the yield, room to keep paying matters more than a few dollars of growth.
On income, Verizon leads too. $10,000 in Verizon pays $680 a year today, against $610 for British American Tobacco. At their 5-year rates, that’s about $808 against about $744 in year 10, and British American Tobacco’s faster raises wouldn’t catch up for more than 30 years (figured in pounds).
And Verizon’s stock is cheap against its own history, at 8.2x forward earnings against a 5-year average of 8.8x.
This isn’t to say British American Tobacco’s dividend is in trouble. It grew 4.5% a year from fiscal 2015 to fiscal 2025, more than twice Verizon’s pace, and the company carries less debt. It’s just that Verizon’s cushion is wider, and its business is growing into it.
Of course, if British American Tobacco’s free cash flow gets back to where it was before fiscal 2025, this duel gets a lot closer. Its full-year results are the thing to watch.
So what is Verizon stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
