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CenturyLink’s Value Proposition in the US Wireline Telecom Space

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May. 24 2016, Updated 12:04 a.m. ET

CenturyLink’s scale

Earlier, we looked briefly at some key aspects of CenturyLink’s (CTL) performance in 1Q16. In this part, we’ll take a broad look at some of its value-centric parameters. Let’s start with the scale of the company with respect to some of its peers in the US wireline industry.

As you can see in the above bar graph, as of May 6, 2016, CenturyLink had a market capitalization of ~$15.6 billion. Looking at some other players in the wireline space, Frontier Communications’ (FTR) market capitalization was ~$6.2 billion, and Windstream’s (WIN) was ~$0.88 billion on the same date.

It’s worth noting that in the integrated US telecom market, these figures for AT&T (T) and Verizon (VZ) were ~$240 billion and ~$208.4 billion, respectively, on the same date.

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Valuation multiples of CenturyLink

As of May 6, 2016, CenturyLink had a current year EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~5.3x. The ratios for Windstream and Frontier were ~7.7x and ~5.8x. AT&T and Verizon had comparable multiples of ~6.7x and ~6.9x, respectively, on the same date.

CenturyLink’s dividend yield compared to its peers

As of May 6, 2016, CenturyLink had a forward dividend yield of ~7.6%. Windstream and Frontier had forward dividend yields of ~6.6% and ~8%, respectively. The comparable dividend metric for AT&T and Verizon were ~4.9% and ~4.5%, respectively, as of the same date.

For a diversified exposure to select US wireline telecom companies, you can consider investing in the First Trust Utilities AlphaDEX ETF (FXU). FXU held a total of ~19.9% in AT&T (T), Verizon (VZ), Level 3 Communications (LVLT), CenturyLink (CTL), and Frontier Communications (FTR) at the end of April 2016.

In the final part of our series, let’s see what analysts are saying about CenturyLink.

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