I imagine there aren't a ton of you out there hunting down the results of Companiade Telecomunicaciones de Chile
There aren't a ton of people interested in these shares, but the folks who subscribe to Motley Fool Income Investor probably are. This company has one delectable yield, and the true results of the business are hidden by massive depreciation charges.
The quarterly number that is bound to jump out at investors right away is the doubling in net income. However, I'd argue that the company's underlying business metrics are more impressive.
I already mentioned that large depreciation expenses mask the company's true results, but that comment means nothing without the fact that capital expenditures have been held in check the last few years. The company's fiscal 2004 capital expenditures were a mere 24% of its depreciation, which means there's plenty of cash in the till to support the 7% dividend yield and necessary debt repayments.
On the subject of debt, this is where CTC -- we rarely abbreviate with ticker symbols here, but I think a little understanding is in order -- really shines. Since the middle of 2001 the company has reduced its interest-bearing debt load by more than two-thirds. While this does wonders for the company's debt-to-equity ratio, I'm more impressed with the increase in its interest coverage ratio (using cash flow before interest and taxes) from 3.69 times to more than 20 times as of this quarter.
The company's strategy to focus on its landline business and increase its high-speed Internet subscribers doesn't make for high growth. But it's great for stable growth, and the cash flow it generates is more than enough to fund the cash needs of the business and its dividend. A number of rural telecom providers have similar strategies, including Iowa Telecommunications Services
Nathan Parmelee has a beneficial interest in shares of Compania de Telecomunicaciones de Chile but has no financial interest in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.
More from The Motley Fool
Are Tax-Free Municipal Bonds Right for You?
The short answer: It depends on your risk tolerance and investment goals.
Why the Apple Inc. MacBook Pro Won't See a Major Upgrade in 2018
This supply chain report is probably right on the money.
Why AES Corp's Shares Popped 12% Today
An activist is pushing AES into more renewable energy.