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Why CenturyLink Shares Tumbled 14% in February

By Chris Neiger – Updated Apr 12, 2019 at 1:16PM

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Investors don't like it when you mess with their dividends.

What happened

Shares of CenturyLink (LUMN -1.35%), a global communications and IT services company, fell 13.9% last month, according to data provided by S&P Global Market Intelligence, after the company reported its fourth-quarter 2018 results. Investors weren't happy that the company's revenue declined on a year-over-year basis and that it posted a loss -- and they really didn't like the fact that CenturyLink cut its annual dividend.

So what

Total revenue in the fourth quarter was $5.78 billion, down from $6.01 billion for the year-ago quarter. The company's sales across five out of six of its sales segments fell over the three-month period. CenturyLink only grew sales in its Enterprise Revenue segment, and even there, it was less than a 1% gain.

Check out the latest earnings call transcript for CenturyLink.

Graph chart on blue background.

Image source: Getty Images.

Making matters even worse for investors was the fact that CenturyLink's diluted loss per share was a hefty $2.26 in the quarter, a significant drop from the positive earnings per share of $1.06 in the year-ago quarter.

But the most significant reason investors drove down CenturyLink's share price was likely the company's announcement with its fourth-quarter results that it would cut its annual dividend from $2.16 per share down to $1 per share. The company said it wants to put more money toward growing the business and paying down debt, rather than spend so much on its dividend.

CenturyLink's share price began to rebound in the days following the bad news, but the bounce back was short-lived, and shares began to slide again before settling at their 14% drop for the month.

Now what

The company's share price continued to slide in March and is already down more than 5% since the beginning of the month. With the company releasing its fourth-quarter results less than a month ago, it's not all that surprising that CenturyLink's shareholders are still slowly abandoning the stock after its aggressive dividend cut. More than a few analysts downgraded the company's stock over the past several weeks as well, which isn't helping, either.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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