On the 14 September 2018, CenturyLink Inc (NYSE:CTL) will be paying shareholders an upcoming dividend amount of US$0.54 per share. However, investors must have bought the company's stock before 30 August 2018 in order to qualify for the payment. That means you have only 2 days left! Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into CenturyLink's latest financial data to analyse its dividend attributes.
Check out our latest analysis for CenturyLink
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
Does CenturyLink pass our checks?
The current trailing twelve-month payout ratio for CTL is 119%, meaning the dividend is not sufficiently covered by its earnings. Going forward, analysts expect CTL's payout to increase to 170% of its earnings, which leads to a dividend yield of around 9.5%. However, EPS is forecasted to fall to $0.97 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Dividend payments from CenturyLink have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
In terms of its peers, CenturyLink has a yield of 9.5%, which is high for Telecom stocks.
Next Steps:
After digging a little deeper into CenturyLink's yield, it's easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. Below, I've compiled three key aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for CTL’s future growth? Take a look at our free research report of analyst consensus for CTL’s outlook.
- Valuation: What is CTL worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CTL is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.