The CTL dividend cut barely propped up the earning to a break even point...I am concerned that if their revenue continues to decline they will cut the dividend further to prop up earnings again..the mathematical ploy of a share buyback to prop up earnings "PER SHARE" also makes me wonder if this company has any actual telecommunications related growth ideas...as opposed to using accounting ploys to manipulate their balance sheet.
They beat their number but took down the guidance a few pennies. Very happy since the stock should pull back today. I bought 1000 shares of CTL couple days before earnings. Paid 36.10 and wrote 10 calls for .69. I am break even on the transaction down to about 35.50. Come the 15 Aug I will consider writing another option. In about 3 weeks they will pay me a dividend and my cost will go below $35. Like making money on this stock.
What are you talking about? Qualified dividends are paid out of after-tax earnings, cutting the dividend has no impact on earnings. Dividends are paid in cash. Cutting the dividend freed up cash that CTL is using to buy back shares. Fewer shares in the future, less cash paid out in dividends. CTL is shrinking the company in a thoughtful way.
Payout of dividends usually compared to % of earnings to verify capability of a company being able to maintain dividend payout level. Ability to pay also based on FCF but have seen companies increase debt to pay dividends.
Stock buybacks are done usually when a company believes their stock is underpriced and also another reason, as I believe is the main driver with CTL, they need to create more stockholder value. Stock buybacks reduce number of shares increasing value of remaining shares.
If interest rates begin going up then CTL stock will suffer placing more pressure on them to create stockholder value. Their competitive environment has changed greatly and they have to prove they can be successful which is my biggest question at this point.