Verizon vs. Nike: Which High-Yield Dividend Stock Offers the Safer Payout?

Income investors chasing above-average yields often turn to consumer brands and telecom stocks, and two names that frequently come up are Verizon Communications (NYSE: VZ) and Nike (NYSE: NKE). Both have raised their dividends annually for nearly two decades—19 years for Verizon, 24 for Nike—and both offer yields that tower over the broader market.

But yield alone doesn't tell the full story. The real question is which payout is built to last—and which business is actually gaining traction. So which stock deserves a spot in your portfolio?

Let's start with Nike. The sneaker giant's dividend yield of about 3.7% is unusually high by its own historical standards, but that's more a reflection of the stock's slump than a sign of generosity. Shares are hovering near a 10-year low.

In November, Nike raised its quarterly dividend by 3% to $0.41, marking the 24th consecutive annual increase. But the business behind that payout is struggling. In its fiscal third quarter of 2026 (ending Feb. 28, 2026), revenue came in at $11.3 billion—flat on a reported basis and down 3% on a currency-neutral basis. Wholesale revenue rose 5%, but Nike Direct fell 4%, digital sales slid 9%, and Greater China continued to weaken. The Converse business saw a staggering 35% drop.

The bigger concern is profitability. Earnings per share plunged 35% year over year to $0.35, as gross margin contracted 130 basis points to 40.2%, weighed down by higher tariffs in North America. CEO Elliott Hill acknowledged the challenges during the earnings call, saying, "We have approached this comeback deliberately across brands, sports, geographies, and channels, with some parts of the portfolio moving faster than others."

A significant chunk of the revenue softness came from removing what management called "unhealthy inventory" of classic footwear franchises—a move that created a five-point headwind. And the outlook for fiscal Q4 isn't much brighter: revenue is expected to fall 2% to 4% year over year, with Greater China dropping about 20%.

All of this leaves the dividend on shaky ground. Over the next 12 months, Nike could pay out roughly $2.4 billion in dividends—but its free cash flow for fiscal 2026 is tracking below that level. That's a red flag for income investors.

Now consider Verizon. The telecom giant's dividend yield sits near 5.9%, but unlike Nike, the story behind that yield is improving rapidly.

In late April, Verizon reported first-quarter 2026 revenue of $34.4 billion, up 2.9% year over year. Adjusted earnings per share rose 7.6% to $1.28, and adjusted EBITDA hit a record $13.4 billion, up 6.7%. Free cash flow climbed 4% to $3.8 billion. Even more encouraging, Verizon posted its first positive first-quarter postpaid phone net additions since 2013—a clear sign that subscriber momentum is finally turning. CEO Dan Schulman summed it up: "Our first-quarter 2026 results show that our turnaround is not only progressing, it is gaining momentum."

Management raised its full-year adjusted earnings-per-share growth guidance from 4%-5% to 5%-6%, and reaffirmed its 2026 free cash flow outlook of $21.5 billion or more—growth of at least 7%. That strong free cash flow is what sets Verizon apart. Its annual dividend of $2.83 per share works out to roughly $11.8 billion in payouts—about half of expected free cash flow. That's a comfortable cushion, leaving room to pay down debt from the recent Frontier acquisition, fund more share repurchases, and continue raising the dividend.

Overall, Verizon looks like the clear winner in this comparison. Not only does it offer a higher yield, but its dividend is far more durable. While neither stock is risk-free, the odds strongly favor Verizon as the better long-term investment. Nike's payout could become more attractive if its turnaround gains traction, but for now, the dividend looks vulnerable and could face cuts or slower growth.

Market reaction from investors:

"I've held Nike for years, but this is getting ridiculous. They're paying dividends with borrowed money at this point. Verizon at least has the cash flow to back it up," said Mark T., a retail investor from Chicago.

"People are too quick to write off Nike. They've been through rough patches before. The brand is still iconic, and once they clear out the inventory mess, the dividend will be fine," countered Linda R., a long-term Nike shareholder from Portland.

"Honestly, I think both are traps for income investors. If you want yield, go buy a bond ETF. These stocks are just yield traps dressed up in nice logos," said Jake M., a financial advisor in New York who describes himself as "tired of dividend hype."

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.

This article was originally published by The Motley Fool.