CTL Rewards Its Shareholders With a High Dividend Yield
In order to achieve capital preservation and steady income from an investment, a high-quality company with very predictable earnings is best. One segment that is great at fulfilling this need is the consumer staples sector. Most companies in consumer staples earn money no matter the performance of the economy, with earnings actually increasing as time passes due to being protected from inflation costs.
One business that fits this profile is Centurylink Inc (NYSE:CTL). The company provides communications services to residential clients, businesses of all sizes, and government entities, including local and long-distance voice plans, broadband, multi-protocol label switching, data services, and video services, just to name a few.
Let’s take a look at how you could potentially boost your bottom line with an investment in CTL stock.
Get Paid for Your Time
CTL stock is currently trading at $18.27, going by its dividend yield of 11.9%. The dividend payment is $0.54 per share, paid quarterly. Over the past five years, the payment has remained the same–in other words, it has remained predictable.
To get a sense of how large this payment is, it represents a dividend yield that is more than double the industry average of 4.9%. And when compared to the S&P 500 Index, which is used as a benchmark for investors, CTL stock is yielding a dividend yield that is more than six times the average. That means that Centurylink is not only a solid business, but provides a much higher return on investment.
Protected Earnings
A high and steady dividend is possible because of the nature of Centurylink’s business and how difficult it is for a new entries to compete.
One reason why the earnings are steady is because there is not much money being spent to maintain the business. Rather, money is spent to maintain the current assets and infrastructure. The consumer staples industry also has high barriers of entry, namely a large amount of startup capital being needed to both start the business and acquire distribution rights.
Evidence of the protection of and steadiness in the earnings is shown in the annual reported revenue. From 2012 to 2016, total revenue–from which the dividend is taken–came in at around $18.0 billion, while gross income stayed around $6.0 billion. (Source: “CenturyLink Inc,” MarketWatch, last accessed September 12, 2017.)
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Trading Below Liquidation Value
Shares of CTL stock are currently not trading at the value that they should be, were the entire business to be sold off today. The company’s price-to-book (P/B) value of the shares is 0.8 times, or $0.80 returned via the share price for every $1.00 in assets. That means the shares are trading at a 20% discount.
Centurylink’s solid foundation of earnings, with the value within the company and high dividend yield being offered, could get the stock to trade higher.
Final Thoughts about CTL Stock
Even though Centurylink is not offering any sort of new technology, it remains a very strong investment worth consideration because of the reliability of its cash flow. Centurylink may be a boring company, but it continues to reward its shareholders with a high dividend yield. Also keep in mind the income the would be earned, even with the shares trading at a discount.
Also Read:
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