Top Picks 2017: CenturyLink

01/23/2017 6:00 am EST


Harry Domash

Publisher, DividendDetective and Winning Investing

My Top Pick for income investors offers a steady 9% dividend yield plus appreciation potential, suggests Harry Domash, editor of Dividend Detective.

Originally a rural telecom, CenturyLink (CTL) has grown via acquisitions to become a major provider of broadband, voice, video, and data.

It now provides services residential and business customers over a 250,000-route-mile US fiber network and a 300,000 mile international network.

In October, CenturyLink agreed to spend $34 billion in cash and stock to acquire Level 3 Communications, a Fortune 500 company that offers local, national and global communication services to customers in 60 countries.

CenturyLink announced the Level 3 acquisition on the same day that it reported disappointing September quarter numbers.

Its share price immediately dropped more than 20 percent on concerns that it might have to take on excessive debt to finance the acquisition.

However, CenturyLink later eased those fears when it made a deal to sell its datacenter business, which operates 59 centers worldwide to a consortium of private equity investors for $2.2 billion.

In any case, analysts expect that besides for improving CenturyLink’s competitive position, the Level 3 acquisition will immediately add to free cash flow, assuring that it will be able to maintain its 9% dividend yield.

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