Chris Lange
5 min read
Quick Read
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Verizon’s 6.3% yield is backed by strong coverage, with dividends consuming only 57% of EPS guidance and 58% of first-half free cash flow.
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T. Rowe Price’s quarterly dividend grew from $1.24 to $1.30 while its share price fell 37%, but $56.9 billion in 2025 client outflows signal real business damage.
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Cramer calls accidental high yielders ‘safe havens’ in Fed-driven sell-offs, but warns the bounce only comes once tightening ends.
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The Federal Reserve raised its target range on September 17, 2026, which lifted the upper bound to 4.00% from 3.75%. On the October 16, 2026 episode of Mad Money, Jim Cramer explained how he handles the selling that follows a rate hike:
“Sell-offs in the wake of the Fed raising rates, those are trickier, although they can lead to decent opportunities as long as you stay away from the high yields that become less attractive as the Fed tightens, and stick with the accidentally high yielders that might just give you the delicious bounce when the Fed’s done tightening.”
He added: “These dividend stocks are safe havens when you’re dealing with a sell-off caused by the Fed.”
Three Tests That Separate Bargains From Yield Traps
Cramer’s accidental high yielder is a quality dividend payer whose yield rose only because its share price fell. A yield trap gets its high yield from a shrinking business, or it loses its appeal as cash and bond yields rise (we laid out seven warning signs a big yield is about to be cut in a free dividend traps report). Three checks help you tell them apart:
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Why the yield rose: if the price fell on macro fear, the stock fits. If earnings are falling, it does not.
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Coverage. Earnings and free cash flow should cover the dividend with plenty to spare.
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Balance sheet. Debt should be manageable or shrinking, so the payout never has to compete with lenders.
Verizon’s 6.3% Yield Clears the Coverage Bar
Verizon (NYSE:VZ) pays $0.7075 a quarter. That annualizes to $2.83, a 6.3% yield at the $44.63 share price. The stock is down 2.37% over the past month and fell 1.26% on Friday, the day Barron’s reported telecom stocks tumbling as Elon Musk pushes into the industry. It is still up 17.12% for the year, so Verizon only partly passes the price test.
