CenturyLink, Inc. (CTL), an integrated communications company, has support for a 7% dividend due to the company’s strong cash flow and debt refinancing, and is looking at up to 30% upside from current levels, says Andrew Tuttle, Senior Analyst at Crow Point Partners.
“CenturyLink is a residential and business player, nearly nationwide, but it’s characterized by very strong cash flow, and over the last 12 months it’s refinanced maybe half of its debt, so there’s support for about a 7% yield comfortably right now,” Tuttle said.
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As Tuttle’s firm screens balance sheet quality, CTL comes to the forefront, with significant free cash flow after dividends and nearly 30% upside from where the stock is currently priced.
“The screens that we do will run through the quality of the balance sheet. And for dividend purposes, you can’t pay a dividend unless you have cash flow, so we need companies with strong cash flow and sustainable business models,” Tuttle said. “[CTL] is throwing off about $1 billion in free cash flow after dividends, which is committed to repurchasing shares in the open marketplace. In addition to the 7% yield, I’d say there’s a good 25% to 30% upside in the stock from current levels.”
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