Should You Worry About This Massive Telecom Dividend?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

CenturyLink (NYSE: CTL  ) totally waxed Wall Street's earnings estimates in the first quarter. Adjusted earnings rang in at $0.68 per share, well beyond the average analyst target at $0.58. Revenue of $4.6 billion was right in line with the Street view. Just to rub it in, management raised earnings and cash-flow guidance for the second quarter just north of current analyst targets.

The telecom's integration of former rival Qwest is running ahead of schedule and budget, helping the bottom-line expectations in both the long term and the short.

Results like these tend to send shares soaring the next day, but CenturyLink investors have only enjoyed a modest 3% gain here. So what's held the stock back today?

For one, sector rival Windstream (Nasdaq: WIN  ) also posted earnings overnight and ended up one of the market's biggest losers on Thursday. Some investors may take Windstream's troubles as a warning sign for regional and hardwired telecoms in general. Memories of another weak report from smaller competitor Frontier Communications (Nasdaq: FTR  ) earlier this week also put a lid on CenturyLink investors' enthusiasm. Like CenturyLink, Frontier leans heavily on acquisitions to fuel top-line growth. Frontier's cash flows are starting to look weak unless you back out a plethora of non-standard items, and the already reduced dividend could be in further trouble.

I don't think those fears really apply to CenturyLink, though. This company's generous 7.6% dividend is powered by very solid cash flows. This quarter, CenturyLink paid out exactly half of its free cash flows in the form of dividends -- a safe and, most importantly, sustainable level.

One thing the telecom industry is known for today is its tempting dividend yields.  Not all of them are as safe as I would like, but there are a few rock-solid dividend stocks I wouldn't mind sticking in a retirement portfolio for years of worry-free cash generation. Learn how to Secure Your Future With 9 Rock-Solid Dividend Stocks by reading our special free report. It’s yours today, but only for a limited time.

Fool contributor Anders Bylund holds no position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1884925, ~/Articles/ArticleHandler.aspx, 11/29/2015 4:41:14 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Anders Bylund

Anders Bylund is a Foolish Technology and Entertainment Specialist. Where the two markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life.

Hypoallergenic. Contains six flavors not found in nature. Believes in coyotes and time as an abstract.

Follow Anders on Twitter, LinkedIn, and Google+.

Today's Market

updated 1 day ago Sponsored by:
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 1.24 0.06%
NASD 5,127.53 11.38 0.22%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

11/27/2015 1:01 PM
CTL $27.06 Up +0.08 +0.30%
CenturyLink, Inc. CAPS Rating: ***
FTR $4.96 Up +0.06 +1.22%
Frontier Communica… CAPS Rating: **
WIN $6.22 Up +0.05 +0.81%
Windstream Corp CAPS Rating: **