Phone-company dividends have long been like death and taxes: a sure thing. Is that still the case? That is a particularly acute question for Verizon Communications. It hasn't only suffered profit erosion in its traditional landline business, it is also spending heavily to build its new FiOS network. The result was no free cash flow from Verizon's wireline operations to pay the dividend last year. Of course, Verizon Wireless is generating cash at the rate of about a billion dollars a month, Moody's estimates. But Verizon owns only 55% of the wireless company. Vodafone Group owns the rest. That means Verizon can't automatically tap the wireless cash. The wireless company isn't paying dividends, only tax-related distributions, which last year totaled about $1.5 billion. So how did Verizon afford its $5 billion dividend in 2008? The tax distributions helped, as did $670 million in dividends from Verizon's interest in Vodafone Italy. But Verizon also had to borrow.
