Verizon Wireless to pay $8.5 billion dividend to its owners

Verizon Wireless said on Monday that its board agreed to pay a total dividend of $8.5 billion to its two parent companies, Verizon Communications and Vodafone Group Plc .

The announcement follows months of investor speculation as to whether Verizon Wireless would pay a dividend this year.

Verizon Communications, which owns 55 percent of Verizon Wireless and is dependent on wireless operations for growth, could put the cash toward its capital spending, debt interest or its own shareholder dividends, Barclays analyst James Ratcliffe said.

"It's driven primarily by the cash needs of Verizon Communications," said Ratcliffe, who had expected a distribution in the range of $10 billion to $12 billion.

Verizon declined to comment on the size of the pay-out or how it plans to use the cash.

The pay-out is down from the $10 billion dividend that Verizon Wireless announced in July 2011 and paid in January 2012.

In the past, the dividend had been a bone of contention for Vodafone shareholders, anxious to get a return on their ownership in the top U.S. wireless service. The dividend had been suspended from 2005 through 2010 while Verizon Wireless focused on paying down debt.

Verizon Wireless said the distributions would be paid in one or more tranches, with each tranche paid in proportion to the two owners' partnership interests.

The announcement came the day before Vodafone was due to report its half-year results. The dividends are due to be paid on or before December 31, Verizon Wireless said.

Vodafone's U.S. shares edged higher in late trade after closing at $26.39 on Nasdaq. Verizon shares rose to $42.62 after closing at $42.56 on the New York Stock Exchange.

(Reporting By Sinead Carew; Editing by Phil Berlowitz, Andrew Hay and Leslie Adler)