CenturyLink Inc. (CTL, Financial) shares fell 0.75% to end the week as the company's stock continues to tumble going into 2018. CenturyLink stock fell 30% in 2017, as investors doubt the company will be able to continue to support its dividend payment.
The company's main weakness is its legacy business.
CenturyLink's dividend of 13% has made it a popular choice among income investors. The company's latest quarterly report in November showed that revenue fell 8% compared to the year prior, with earnings per share falling 39%.
The company did complete a merger with Level 3, which has seemed to deplete its free cash flow to a point where its dividends are no longer able to be serviced.
The company's share trading price fell 23% in November, as fears of the company not being able to maintain its dividend payout started to mount.
Net income for the 12-month period ending in September fell 50% from the same period the year prior. The company's bottom line is also under pressure, as several lawsuits claim suspect billing practices at CenturyLink.
Level 3's earnings were released on the same day, with the company's revenue rising 1.3% to $2.1 billion. The company's growth is promising for investors after CenturyLink posted lower-than-expected results. Level 3's reported free cash flow was $379 million. CenturyLink also used 520 million shares to pay for the Level 3 transaction, which will raise the company's dividend payout by more than $1.1 billion.
The company paid $24 billion to acquire Level 3.
CenturyLink's Jeff Storey said that the company remains committed to supporting its dividend.
Yahoo Finance reported that the Trump Administration's tax cuts will not help CenturyLink. The company, unlike 80 others which have announced bonuses following the tax cuts, announced on Thursday evening that it will not provide any raises this year. The company's email to employees read: "We cannot afford merit increases across the organization at this time. I understand the effect this decision will have on our company, and I am concerned about the impact it will have on individual employees and their families."
The email, written by CEO Glen Post, stated that the telecommunication industry has changed and faced challenges as a whole. He also noted that the changes and challenges have impacted the company's financial results and the return the company provides to investors.
He noted that the company is transforming and that while it is rebounding, it still faces significant hurdles.
The news came nearly a month after CenturyLink announced that there would be no holiday bonuses in 2017. The company has 52,000 workers across the world. Unionized workers received a $200 holiday bonus in 2016.
Several executives received bonuses prior to the announcement. The former CEO of Level 3 received millions in bonuses. CenturyLink's CFO, who is retiring, also received an additional $1.4 million in severance.
CenturyLink's stock price has fluctuated between $13.61 and $27.61 over the past 52-week period. The company's stock has been as high as $39 a share during the last three years.
Mati Greenspan, Senior Market Analyst at the social investment network eToro, has been monitoring CenturyLink's stock movements and commented: “It's sad to see troubles mounting like this across the United States. The fact that executives are being paid before employees is typical in this sort of environment. Now it looks like they're preparing to stiff investors as well. What a shame. It seems the companies best shot now is to get bought out by a larger company or begin researching blockchain telecommunications technology."
Disclosure: The author does not own any shares in the listed equities.
