What happened

Shares of Lumen Technologies (LUMN -0.39%) (formerly CenturyLink) were down 8.8% at market close on Wednesday. The tumble in share price followed the company's second-quarter 2021 earnings update, which showed a 5% year-over-year decline in revenue to $4.92 billion, but a 34% increase in free cash flow to $993 million.  

So what

Lumen remains highly profitable, but its sales have been stuck in stubborn decline for years as legacy telecom services slowly but steadily lose value over time. Adding to the problem, the company is short on cash and equivalents ($935 million at the end of June) and has plenty of long-term debt ($28.6 billion).  

The back of an internet modem with an ethernet cable plugged into it.

Image source: Getty Images.

Nevertheless, this remains a solid income-generating stock with a current dividend yield of 8%. And management announced a $1 billion share repurchase program -- worth nearly 8% of Lumen's current market cap -- to be executed over the next 24 months.

Now what

There are some upcoming structural changes to accompany the new share repurchase plan. Separate from its earnings report, Lumen said it is selling its Latin America business in a deal worth $2.7 billion, and it will continue providing intermediary services to this business for customers in North America, Europe, and Asia that need access to the region.  

Additionally, Lumen is also selling its local phone, cable, and broadband business in 20 states in the Southeast and Midwest U.S. to Apollo Global Management (APO) for $7.5 billion. It will off-load $1.4 billion in debt in conjunction with this sale and will maintain its national fiber optic cable routes spanning the country. The two divestitures will free up some cash to allow Lumen to invest in its strategic growth priorities like the further development of its national fiber network for businesses and consumers.  

With two big divestitures of its business now in process, big changes could be in store for Lumen next year. While it does get a cash infusion from the deals, a drop in overall revenue and profitability is in store, too. That could affect the company's dividend payment policy. But if new fiber development can rekindle growth, it might be a decent trade-off. Time will tell. 

Lumen Technologies stock trades for a humble 3.5 times trailing-12-month free cash flow after the latest quarterly update.