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These 4.8%-5.9% Yields Could Get Hacked Apart

A stock’s yield is only as good as its cash flow because, after all, a dividend is nothing more than a promise from a company. CenturyLink (CTL) recently reminded us of this. Its promised $0.54 per share dividend exceeded its ability to pay. The firm’s payout ratio of 130% – the percentage of profits that it was paying as dividends – was an absurd over promise that couldn’t last forever: CenturyLink’s Payout Promise Was Always on Borrowed Time CEO Jeffrey Storey insisted his team remained “committed to and confident in our ability to maintain the dividend.” I understood the commitment, but questioned the confidence–taking on debt to pay dividends is a losing game.… Read more
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