CenturyLink layoffs will impact about 1,000 employees or roughly 2 percent of the telecom giant’s workforce, the company has confirmed. The cuts come as CenturyLink strives to invest for growth, integrate the Level 3 acquisition, and pay a massive dividend that currently yields more than 11 percent annually to shareholders.
CenturyLink blamed the cuts on redundancies from the recent Level 3 Communications acquisition. However, the Communications Workers of America District 7, which represents more than 11,000 CenturyLink workers, criticized the cuts — especially amid recent corporate tax cuts and executive bonuses within the company.
In CenturyLink’s defense: Just because a company can afford workers that doesn’t necessarily mean the business should necessarily retain those workers, especially if the positions are truly redundant following an M&A deal.
In terms of channel partner strategy, the CenturyLink-Level 3 business combination is going very well, according to John DeLozier, CenturyLink’s vice president of strategic partners and alliances. The company also has been ramping up a small business sales center.
CenturyLink’s Big Dividend: Protecting the Golden Goose for Investors
The bigger issue for all observers going forward could be CenturyLink’s dividend — which delivers a very lofty 11.68 percent annual yield as of May 6, according to Yahoo Finance.
During a quarterly earnings call back in February 2018, exiting CEO Glen Post indicated that CenturyLink’s principal operational focus is to “drive long-term profitable revenue growth and free cash flow generation so that we can both continue to invest in our business and sustain our strong dividend. We are prioritizing our investments and operational initiatives that we believe will help support that outcome.”
During that same February earnings call, CFO Sunit Patel pulled back the curtain a bit more on CenturyLink’s expected cash flow and associated dividend payments. At the time, he stated:
“Excluding integration-related expenses for the full-year 2018, we expect free cash flow before the dividend of $3.15 billion to $3.35 billion. In addition, we expect free cash flow after the dividend of $850 million to $1.05 billion. Given our confidence in our cash flow profile, over the next few years, we remain committed to the dividend.”
The free cash flow outlook assumes a $100 million pension contribution in 2018, in line with CenturyLink’s contribution level in 2017, he added.
CenturyLink Shareholder Meeting, CEO Transition
The responsibility for paying that dividend will soon shift from CEO Glen Post to his successor, CEO Jeff Storey. Storey will succeed Post at a shareholder meeting this month — far sooner than the original 2019 CEO succession plan that the company announced last year.