This will affect companies like Lumen, which currently carries around $10 billion of floating-rate debt. A concern for the telecom industry is the trend of rising interest rates as a result of the Fed hiking rates to combat surging inflation. But let us contextualize this to gain a better perspective. Lumen carries long-term debt of over $28 billion on its balance sheet and has always had undesirable debt-to-equity ratios ever since the acquisition of Level 3 Communications. All in all, the company's long-term growth initiatives around edge computing and other business-focused services should gradually gain traction, offsetting ongoing declines in legacy enterprise voice services. It must be acknowledged, however, that while the divestitures should combat the revenue declines, they will also lower absolute revenue levels in the short term. We believe fiber upgrades will drive significant growth in Lumen's broadband business, helping it acquire more customers at higher prices. Lumen is continuing to invest in upgrading copper wires to fiber in its remaining telecom footprint, which will expand its fiber footprint from 2.6 million addresses today to 12 million or more by the late 2020s (Quantum Fiber plan). These divestitures make perfect sense for Lumen as these businesses mainly generate revenue from phone services and slow DSL Internet connections: two businesses in rapid decline. The company expects to close two major asset sales in the second half of 2022 - the Latin American operations for $2.7 billion which is expected to close in Q3 2022 and the traditional telecom operations in 20 states to affiliates of Apollo Global for $7.5 billion. Lumen is in the early stages of a medium to long-term turnaround process where the company is looking at divesting some of its less attractive assets and re-investing the proceeds to enhance its remaining businesses. Enterprises, in particular, are continuing to benefit from the ability to use shared rather than private networks while making the most of technological advancements that require less bandwidth and enable more efficient routing. Total revenue declined 7% year-over-year to $4.7 billion in Q1 2022 from $5.02 billion in Q1 2021, largely owing to enterprises and consumers replacing their voice and DSL lines with better cable, fiber optic, and wireless technologies. Lumen's most recent quarterly results (Q1 2022) reinforced the ongoing trend of declining revenues in the telecom industry. In this article, we will evaluate the prospects for Lumen to determine whether the company is still a good buy for dividend investors.ĭivestitures to curb revenue decline new growth initiatives in line Lumen has lost over 18% of its market value in the last 12 months and just over 11% in 2022 - thereby outperforming the S&P 500 Index this year. Lumen is one of the few exceptions to that rule where we believe dividends will make up the biggest chunk of our investment returns in the long run. Although the focus of this portfolio is on income, we tend to prefer investing in companies with strong growth prospects along with a reasonable dividend yield as we believe capital gains will make up a sizeable part of our total returns in the long run. Lumen Technologies (LUMN) is one of the few high-yield dividend stocks that we hold in our model dividend portfolio at Leads From Gurus. This article was prepared by Shahmi Anas in collaboration with Dilantha De Silva. Lumen is likely to come under pressure because of its massive floating rate debt pile, but we believe there's more to the story. Our primary focus is on total returns therefore, we look for opportunities that offer reasonable levels of income and room for capital gains. When we invest in dividend stocks, we place substantial weight on the growth prospects of a company. Lumen stock has declined just over 11% this year, which is not a disappointing performance in comparison to the S&P 500 Index. Does It Make Sense To Buy Lumen Stock For Its Dividend?

Lumen technologies stock