CTL - CenturyLink's Debt Reduction Strategy Is Paying Dividends
In early 2019, CenturyLink (NYSE: CTL) shocked investors by slashing its dividend by more than 50%. At the time, executives said that the dividend cut didn't reflect any lack of confidence in the business. Rather, management decided that it would be better for the company (and long-term investors) to focus more on debt reduction in the near term.
This decision to prioritize deleveraging -- along with a fortuitous decline in interest rates -- is already paying off in a big way in the form of lower interest expense. This long-term cost savings will in turn benefit investors a few years down the road by enabling CenturyLink to make accretive acquisitions or start returning more cash to investors again.
In 2019 -- the first year of its deleveraging plan -- CenturyLink managed to reduce its net debt by more than $2.5 billion.