These aren't the best of times for telco investors. Regional players are getting slammed as they slash their payouts, and the larger players are seeing gains in wireless come undone by losses in their legacy businesses and poor acquisition decisions. 

CenturyLink (NYSE:CTL) took a big hit last week after slashing its fat dividend. AT&T (NYSE:T) is holding up better, but only relatively speaking. Both companies have seen better days, but let's see which investment has the better chance of paying off for their shareholders in the year ahead. 

Check out the latest AT&T and Centurylink earnings call transcripts.

AT&T log with Our Thing in letters around it.

Image source: AT&T.

Holding on the telephone 

CenturyLink was a shining beacon for income investors with its quarterly dividend of $0.54 a share, pushing its yield north of 15% at the start of last week. The distributions never seemed sustainable, with CenturyLink's payout ratio above 100% every year after 2010. Beefy acquisitions and realized synergies can only help so much when your business model is on a gradual decline. 

The company succumbed to reality by slashing its payout rate by more than half last week. It begins this new holiday-abridged trading week with a 7.3% yield, not too far from AT&T at 6.8%. CenturyLink's new rate may be sustainable in the near term, but AT&T's disbursements are ascending, with a long streak of annual increases. 

Things aren't perfect at AT&T, though. Its legacy business continues to lose steam, and it's losing subscribers at DIRECTV, one of its once-promising needle-moving acquisitions, at an alarming clip. It's riding the wave of healthy wireless gains, but the migration to 5G won't come cheap. Its latest deal for Time Warner is paying off early on, but content isn't always king. 

Payouts are a big part of the investing thesis for AT&T and Time Warner, so let's go there. AT&T's payout ratio was 60% in its latest quarter, and it sees the rate improving in 2019 as it heads closer to 50%. CenturyLink's payout ratio will also fall below 100% for the first time in nine years in 2019, but it will be closer to 80% based on analyst forecasts. Both companies may have challenges in the long run, but AT&T's dividend is the one that's more sustainable for now.

CenturyLink's payout cut last week may give it some breathing room, but its overall business continues to go in the wrong direction. AT&T has its problems, but there are things far worse than flattish core revenue growth.

The competition isn't even close at this point. CenturyLink is already bouncing back after the initial plunge following its dividend, but AT&T is the smarter bet in the year ahead.