Lumn share price8/8/2023 Due to the lack of growth potential, the stock is actually more expensively valued than VZ in my view despite its dramatic price corrections.Ī 10% dividend yield seems to hold a magic ring to dividend investors.LUMN is suffering from a high leverage ratio and structural underinvestment. I am concerned about LUMN’s outlook for both the top and bottom lines ahead.In this case, I feel a comparison and contrast is the best way to illustrate my thesis. I will anchor my consideration via a direct comparison against VZ. Then I will explain the following main considerations to remain pessimistic about the stock despite its large price drop. I believe these lessons are of general relevance to dividend investors. In the remainder of this article, I will first summarize the lessons I learned (relearned) from the LUMN example. It directly competes with Verizon ( NYSE: VZ) and AT&T ( T).Īnd the thesis of this article is to argue against such bottom-fishing attempts. After all, LUMN (formerly known as CenturyLink) is a leading telephone company in the U.S., providing a range of services (voice, wireless services, et al) to a sizable customer basis. With such a large price drop, many investors are probably thinking about some bottom fishing here. The stock price collapsed at the same time, suffering a total loss of more than 80% as shown in the chart below (in contrast to the sector gain of 14.6%). In November 2022, the company announced the elimination of its cash dividend payouts (while authorizing a $1.5M share buyback). Indeed, the company had to eliminate its dividend shortly afterward. Plus, a casual look at the commonly quoted payout ratios (more on this later) would show that the dividend payouts are safe.Īnd the purpose of my original article was to caution investors about the high yield and point out some of the hidden warning signs – hidden from the common payout ratios. At that time, the stock was trading at a price of $9.97 per share and paid a quarterly dividend of $0.25 per share, translating into an FWD yield of more than 10%. About a year ago (September 9, 2022, to be exact), I published an article on Lumen Technologies ( NYSE: LUMN) entitled “Is 10% Yield Too Good To Be True?”.
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