Dear Mr. Berko: I’m looking for higher yields, and my stockbroker is recommending that I buy 500 shares of CenturyLink. It pays a wonderful $2.16 dividend that yields about 17 percent. Sometimes the dividend exceeds the company’s net income. For example, last year, CenturyLink earned only $1.10 a share but paid a $2.16 dividend. How can a company continue to pay dividends that are more than its earnings? My broker tells me that when a company’s earnings don’t cover the dividend, management takes the money from cash flow. This is confusing to me. What is cash flow, and how does this work?
— LB, Waterloo, Iowa
Dear LB: I think your broker is smoking too many of those left-handed Luckys!
CenturyLink (CTL-$13.40), formerly known as Century Telephone, is a dumping ground used by the Federal Trade Commission and the Federal Communications Commission for landline phones that AT&T and Verizon want off their books. When a large telecommunications company decides to acquire more cellphone customers, the cockamamie government agencies tell the telecom how many landline phones to divest from its customer portfolio. CTL has benefited nicely from the Verizon and AT&T handoffs and has become the third-largest telecom in terms of yearly revenue ($23.47 billion) in the U.S. of A.
CTL provides broadband, voice and wireless services to businesses and households while hosting cloud capabilities and information technology services. CTL also provides network and data systems management, data analytics and IT consulting and operates over 55 data centers around the globe. CTL has a 250,000-mile fiber network in the U.S. and a 300,000-mile international transport (optical, wireless and submarine cable) network.
