Avoiding A Risky Dividend Stock Is Just As Important As Picking A Good One

CenturyLink (CTL) cratered 22% last Thursday after reporting weak earnings, weak revenue, a poor outlook and a cut in its dividend. A few years ago CTL bought the much larger Qwest Communications. The company has a huge debt load and for a long time popped up regularly on stock screens and articles about dividends for its high yield, which before the price drop and the coming dividend cut, was about 7% compared to 5% for AT&T (T) and 4.6% for Verizon (VZ) (which some clients own). It is typical for telecom companies to carry a lot of debt but CTL has a lot of debt relative to its peers. During the day I got an email from a PR firm for the AdvisorShares Ranger Equity Bear Fund (BEAR) noting that the fund is short CTL because "We knew the company's dividend was at risk. The company did a capital lease... Read more