I’d buy 1,924 shares of this US stock for £4,000 in passive income

the American communications giant Verizon (NYSE: VZ ) is one of the highest dividend stocks in the US. At current prices, I think it could be a good investment to generate consistent passive income.

The stock price is now down more than 18% over the past five years, and is around $39 a share, trading below its 2019 peak of $62.

The decline is mainly due to weak customer growth in 2022 and, to me, seems too big. As a result of the price drop, the company currently has an attractive price-to-earnings (P/E) ratio of 7.76. This shows that the stock is a good value for me to buy now.

Rising dividends

Although Verizon’s stock price has fallen over the past few years, its dividend has continued to rise. The company has increased its payout every year since 2007.

The dividend yield in 2023 is 6.7%. This represents a significant percentage increase compared to recent years.

In 2011, the dividend payment per share was $1.97. It was also the last year, until now, when Verizon was regularly priced at $39. The amount of dividend payments on shares of 2023 for the year 2023 is 2.61 $.

Therefore, for the same outlay in 2011, I can expect an extra 1.7% return from dividends.

Furthermore, in March, CEO Hans Vestberg committed the company to “provide long-term shareholder value“. So I don’t expect the company’s dividend to break its 16-year record high any time soon.

How much should I invest?

If I buy Verizon stock now, I want to target a level of passive income that will help me long-term.

Today, 1,924 stocks will generate more than $5,000 – or more than £4,000 – in passive income. It is paid quarterly, which can be done in amounts of £1,000 every three months.

Of course, now is a good time to buy, 1,924 shares at $39 would be worth $75,036 (£60,426). That’s a pretty significant amount for me to invest together.

Therefore, if I were to buy Verizon stock today, I would start by buying it in multiples of 15 or 60. That is how many shares I would have to own, at the current price, to use the dividend to buy more.

At the current yield, 15 shares would give me a dividend of $39 and allow me to add new shares every year. Alternatively, 60 shares will give me the same $39 payment per quarter, which will allow me to reinvest in new shares every three months.

As I have around 20 years to retire, I will have time to reach my target passive income of £4,000, or more. I don’t need passive income right now, so if I buy stocks, I want to reinvest the dividends every quarter.

This will help me increase my passive income until retirement, even if I don’t buy any more stocks. However, I still need to invest a regular amount to achieve my goals.

As we move into the new tax year for my Stocks and Shares ISA, I have other investment priorities at the moment. However, I will be revisiting Verizon in the future if the price-to-dividend ratio is still attractive when I have some spare cash.