Are Verizon and AT&T Dividend Yield Plays or Yield Traps?

If you're an income-focused investor, no doubt Verizon Communications (NYSE: VZ) and AT&T (NYSE: T) have popped up on your radar. While the broader S&P 500 has a dividend yield of 1.9% and the 10-year U.S. Treasury bond of 2.3%, Verizon and AT&T yield 5.3% and 5.8%, respectively.

It's not just high dividend yields. Shares of AT&T and Verizon currently trade for forward price-to-earnings ratios of 11.4 and 11.7, respectively, versus the S&P 500's 21 forward multiple. It's clear Wall Street doesn't have high expectations for these companies. As of this writing, year to date, shares of Verizon and AT&T have lost 15% and 19%, respectively, while the overall market has advanced by 16%.

You must ask if these companies are good yield plays that will continue paying their dividend for years to come or if they're yield traps -- companies that lure investors in with high yields only to cut them or substantially underperform the market.

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Source: Fool.com