This stock screams BUY!

This is not a new selection for me and I do own 2000 shares of this company, but investors and traders when a great stock is taken out back and beaten up good without any serious reason it rates BUY and BUY!  I also mentioned this stock on my radio show last Friday as well, so I am eating my own cooking here. Even if I am missing something the dividend payout at now 8.8% is worth pulling up to the table and taking a nice bite of for income investors.  Centurylink, symbol CTL, just keeps getting hammered and market is again doing so today.  The reasons in my opinion are not justified, but for the record I will put them out there. CTL just bought Qwest and frankly Qwest was not the best run company in the world so CTL is being punished for the acquisition. CTL has also significantly lowered profit forecasts going forward from anywhere near $1.90 to as low as $1.70 to account for the acquisition going forward. However note CTL is also forecasting a nice recovery in profits back to the old level in 2012 and 2013.

 

 CTL is not valued on profits, but cash flow, because as a legacy telecom company they have lots and lots of write offs and writing down of capital expense going forward so essentially they pay low taxes and have much more cash to play with each year. CTL pays out that cash to investors and only uses about 50% of cash flow in doing some allowing for a robust captial investment plan.  CTL does have a nice debt load, but even after servicing the debt load the company has ample resources to grow and pay dividends.

 

CTL management has also shown itself to be a solid buyer of merged legacy telecom companies and knows how to squeeze out cash from the acquisitions.  Embarq is a perfect example and I expect Qwest to be no less positive going forward for the company. Actually Qwest might be a better buy since Qwest has significant urban assets from which to leverage sales and technology. CTL has partnered with Verizon to sell wireless in their areas of service and continues to sell DSL and television access too.

 

Yes, I believe in this company and will likely consider taking another bite of this delicious safe dividend myself. Remember CTL is a S&P 500 stock and is going to be around a long time as they service areas where the big boys of telecom, AT&T and Verizon, have no desire to expend resources.  I would again suggest you consider CTL at the current price of under $33 an excellent buy for BOTH income and capital gains.