CenturyLink Inc. tumbled the most in more than three decades, wiping out about $6 billion in market value, after the phone and Internet carrier slashed its dividend by 26 percent and analysts downgraded the stock.
The quarterly dividend will fall to 54 cents a share from 72.5 cents, according to a statement yesterday from Monroe, Louisiana-based CenturyLink. At least six analysts downgraded the stock today following the move, unappeased by the company’s plans to buy back as much as $2 billion in stock.
“This is one of the most unusual capital allocation decisions I have ever seen,” said Todd Rethemeier, an analyst with Hudson Square Research in New York.
The shares tumbled 23 percent to $32.27 as of the close in New York, the biggest one-day decline since at least 1980. The stock had climbed 6.6 percent this year through yesterday, in line with the gains of the Standard & Poor’s 500 Index.
The selloff reflects the appeal of CenturyLink’s dividend, which is a more permanent return of cash to investors than discretionary share buybacks, said Rethemeier.
“Anytime there’s a dividend cut, there’s going to be selling pressure,” the analyst said. “I think this caught people off guard.”
He said he’s maintaining his buy rating on CenturyLink because the selloff presents an opportunity to purchase shares.
While investors punished the company for its plans, CenturyLink’s workers moved closer to an escalation of their own dispute with management.
The Communication Workers of America, the union representing 13,000 CenturyLink employees, said it authorized its executive board to set a strike date. The labor contract expired in October and bargaining, which started in August, continues, according to a CWA statement. The organization’s president must choose the date before a strike can begin, a step that hasn’t happened yet, the labor group said.
CenturyLink was formed after CenturyTel Inc. bought Embarq Corp. in 2009. The company acquired Qwest Communications International Inc. two years later. The company operates almost 14 million phone lines across 37 states.