Stephen Lin

Short CenturyLink: Look Past Stock Buybacks And Dividends For A 45% Return

Introduction and Background

Traditional ILEC businesses are experiencing significant competition from wireless service providers, as well as cable, satellite and other CLECs, and CenturyLink (NYSE:CTL) is no exception. The company is investing in its strategic broadband and datacenter businesses as well as its network in an attempt to mitigate the steady deterioration of its legacy voice business. Despite steadily decreasing revenue, profitability and cash flow, management maintains it expects an inflection point in revenue growth in 2015, when growth in strategic broadband and datacenter services should overtake the decline in legacy services.

During its Q1 earnings call on February 14, 2013, the company announced significant changes to its capital allocations strategy, including 1) reducing the quarterly dividend 26%...

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