In the stock market it seems like there is always something to worry about. Whether it's inflation, deflation, high interest rates, or low interest rates, an old investing adage is the market climbs a "wall of worry." In addition, the stock market seems dominated by short-term traders who sell first and research companies later. The good news is, one man's trash is another man's treasure, and as CenturyLink (NYSE:CTL) has recently been trashed (down over 9% in the last month), long-term investors are being given a buying opportunity.

A solid dividend and promises kept
When CenturyLink cut their dividend in February, the stock nosedived on the news. Investors didn't like that the company was going to pay less in dividends, but they did announce a $2 billion share repurchase as part of the reason for the dividend cut.

In retrospect, it really should have been no surprise that CenturyLink's dividend was reduced as their local telecom peer, Frontier Communications (NASDAQ:FTR), had to cut their dividend last year. While Windstream (NASDAQ:WIN) has yet to cut their dividend, the company's financials point to trouble down the road.

The good news for CenturyLink investors is the company has kept its promise to repurchase shares. In fact, of the three local telecoms, CenturyLink is the only one to reduce its share count in the last year.

This is just the first reason investors should consider the shares, CenturyLink now has 2.61% less diluted shares compared to last year, whereas both Frontier and Windstream's share count has increased. Since CenturyLink isn't done with its $2 billion share repurchase plan, this should provide a floor for the stock.

Organic growth and retention
The second reason investors should give CenturyLink a second look is the company is doing a better job retaining voice lines than its peers. While local telecoms try to grow their high-speed Internet and video offerings, a key component of their cash flow is retaining their voice lines.

In the last quarter, CenturyLink reported access lines declined by 5.78%, whereas Windstream reported a 6% decline, and Frontier would only say that voice line minutes of use declined by 13.88%. While CenturyLink maintained relatively more of its voice line subscribers, the company also saw an increase of 2.48% in its high-speed Internet subscribers and a 9.24% increase in its PrismTV (video) offerings.

Two more ways this company is the best
The third and fourth reason to buy CenturyLink are directly connected to each other like two people on the telephone. The company pays the least amount of interest relative to their operating cash flow, and this also gives the company the lowest payout ratio for their dividend.

If investors are looking to avoid a troubled company, one way to gauge how bad things are is by comparing the company's interest expense to operating income. When a company can barely cover its interest payments, you know that their dividend is anything but safe. Windstream is the poster child for this issue with 71.15% of their operating income being used for interest expense. Frontier performs slightly better by using 62.57% of their income for interest. By comparison, CenturyLink beats their peers handily by using 45.45% of their operating income to cover interest payments.

Less in interest payments means CenturyLink has relatively more money for dividends and share repurchases. It makes sense that CenturyLink used just 47.32% of their core free cash flow (net income + depreciation – capital expenditures) on dividend payments in the last six months. Frontier pays a higher yield, but the company's cash flow payout reflects this with a percentage of 69.56% covering the dividend. Unfortunately for Windstream investors, their company's payout ratio was 103.35%.

Pick up this value
As you can see, CenturyLink is outperforming its peers in key categories of its operation. While the stock doesn't have the highest yield, the recent decline gives investors a yield of more than 6.5%. The company has the lowest forward P/E ratio of the group at just over 12 times projected earnings as well.

A dividend cut is always painful, but it seems CenturyLink's management was being prudent, and is following through with their share repurchase plan. A strong dividend, low P/E, good organic results, and a continued share buyback program sounds like an opportunity ringing in investors' ears. Make sure you answer the call, and pick up this value while you can.

 

Chad Henage owns shares of CenturyLink. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.