I hardly need to introduce Verizon. The telecom giant keeps landing on investors' radar because of its dividend, and this moment is no exception. At a price of $46.43, the yield sits around 6%. Compared to the S&P 500 average of under 1%, that's hard to ignore. Still, I'm not simply buying the stock. I'm hedging it, with a dividend collar. More on that below.

Stocks with unusually high yields come with their own traps. Plenty of companies once looked like safe dividend payers before eventually cutting or eliminating the payout. With Verizon, I don't see that risk right now. The payout ratio on a free cash flow basis has stayed below 60% almost every year since 2018, with one exception. That's a well-covered dividend.

At the same time, Verizon is dealing with real structural pressure. Revenue growth is close to nonexistent. A saturated US market has held revenue growth to just 2.4% annually over the past 20 years, and only 1.5% over the past five. Add fierce competition, increasingly from SpaceX's Starlink, and you get a picture that likely contributed to the stock's repeated slumps.

There are strategic moves underway that could accelerate that growth rate. In an AI-obsessed market, Verizon is no exception: it's leaning into the boom. Concretely, the company is expanding long-haul fiber, metro networks, data center interconnection, and edge inference sites, putting previously idle fiber assets to work.

The second piece: Verizon is converting existing central offices into edge data centers for AI inference. It has the advantage of sites that already have grid power and permits in place, meaning they can go live fast. Management expects revenue from the broader AI Connect pipeline to noticeably impact results starting in 2027, growing substantially over the following five to ten years, with margins at or above the company's existing structure. That's a plausible path to offsetting the weakness in the core mobility business over time.

What stands out to me is that Verizon expects no meaningful incremental capital spending to execute this AI strategy. It says the buildout fits within its existing capex plans. Given the company's already high debt load, I consider that good news.

Taken together, this reinforces my view that Verizon will keep paying a strong dividend. What I don't see is much upside in the stock itself. The price chart makes that painfully clear: solid dividends over the years, a share price performance that's been a disaster. That contradiction, reliable income paired with a disappointing chart, is the real story here. And it's exactly what I'm building my position around.

Instead of buying the stock outright and hoping for gains I don't really expect, I hedge the position from day one. I buy the shares, buy a put as downside insurance, and sell a call whose premium covers most of the put's cost. The result: both my loss and my gain are capped from the start, while I keep collecting the dividend.

For a stock I don't trust much on price, I prefer that trade-off: a tightly capped outcome between roughly -3.8% and +18.4%, rather than an open-ended risk profile where a falling share price can quietly eat up the dividend. I don't need a rally. I just need Verizon to clear $52.50, or to keep paying while I wait.

Is Verizon a buy? At current prices, I don't see meaningful upside in Verizon's stock itself, the chart has been a poor performer for years despite a well-covered dividend near 6%. Instead of buying the shares outright, I've structured a dividend collar that caps my outcome between roughly -3.8% and +18.4% over the position's life while still collecting the dividend. The main risk is competitive pressure on Verizon's core mobility business, particularly from SpaceX's Starlink, which could weigh on the stock beyond what the collar's floor accounts for.

Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice. I am not a financial advisor. Always do your own research before making any investment decision.

Disclosure: I may hold direct or indirect positions (including options) in any securities mentioned in this newsletter. My opinions are my own and always honest.