Verizon (VZ 0.92%) pays a monster dividend. At 6.8%, it's one of the 10 highest-yielding dividend stocks in the S&P 500. That's not exactly a good thing, as higher-yielding dividend stocks tend to have a higher risk profile.

However, Verizon's big-time dividend is very safe. That's abundantly clear from the telecom giant's financial results for 2024 and outlook for 2025.

Continued improvement where it matters most

Verizon had a solid year in 2024. The company's total revenue nudged up 0.6% to $134.8 billion thanks to a 3.1% uptick in wireless service revenue. It generated an industry-leading $20 billion of wireless service revenue in the fourth quarter, as its price increases are starting to pay dividends.

The company produced $36.9 billion in cash flow from operations last year. While that was down from $37.5 billion in 2023 (due to higher taxes and interest expenses), its free cash flow increased to $19.8 billion (from $18.7 billion) thanks to lower capital spending ($17.1 billion in 2024 compared to $18.8 billion in 2023). Verizon's abundant free cash flow more than covered its dividend outlay of $11.2 billion.

Verizon used the cash it retained to strengthen its balance sheet. It ended the year with a net leverage ratio of 2.3 times, down from 2.6 times at the end of 2023. That leverage level supports the company's solid investment-grade bond ratings (A-/BBB+/Baa1).

The telecom giant's strong free cash flow and falling leverage ratio have made its payout increasingly safer over the past year.

Further improvements ahead

Verizon expects 2025 to be another solid year. The company anticipates total wireless service revenue will grow by 2% to 2.8% this year. Meanwhile, it sees its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rising 2% to 3.5%. That's an acceleration from the 2.1% increase in adjusted EBITDA it delivered last year. Verizon also expects to deliver adjusted earnings per share from flat to up 3% this year. That's an improvement from 2024, when its adjusted earnings per share declined 2.5%.

That sets the company up to produce strong cash flow. It plans to use some of that money to increase capital spending to a range of $17.5 billion-$18.5 billion to support the expansion of its wireless, broadband, and AI infrastructure. That positions it to produce between $17.5 billion and $18.5 billion in free cash flow. That free cash will easily cover the company's dividend while enabling it to continue strengthening its balance sheet.

Verizon is in a strong position to continue growing beyond 2025. The company has invested heavily in expanding its wireless and broadband networks, which should support its continued growth in the coming years. Meanwhile, it took a big step to enhance its fiber network by sealing a deal to buy Frontier Communications for $20 billion late last year.

That transaction will enhance its fiber network while positioning it to generate at least $500 million in annual cost synergies. The deal likely won't close until 2026 as it undergoes a lengthy regulatory review.

In addition, the company sees a robust market opportunity in AI. It has industry-leading assets that will be crucial to providing the infrastructure needed to support AI. It sees a more than $40 billion total addressable market for telecom AI delivery and more than $1 billion of business in the short term by leveraging its existing infrastructure.

Verizon's growth drivers position it to continue increasing its high-yielding dividend. Last year was the 18th in a row it raised its payment, the longest current streak in the U.S. telecom sector.

Verizon's dividend is increasingly safe and secure

Verizon's strategy has started to pay off in recent years. Its heavy investments in building out its 5G and broadband networks are beginning to drive growth. Meanwhile, the company is producing lots of cash, which allows it to continue investing while growing its dividend and strengthening its already solid balance sheet.

Because of all this, the company's monster dividend is on a very safe foundation. That makes it an attractive option for those seeking a lucrative passive income stream.