SELL CenturyTel (CTL) at the Market

The time has finally come to issue a SELL recommendation for CenturyTel (CTL). The stock has performed moderately since the Research recommendation was issued on March 31, 2008. This company may be poised to reach the $41 level or Valueline’s cashflow mean of 5x. However, the returns that this stock has provided in the last five months say that it is worthwhile considering alternatives.

CTL was recommended when it was trading at $33.47. As of the close of market on Monday September 8, 2008 CTL was quoted at $39.45. This equals a return of 17.87% in five months. Conservatively, on an annualized basis this would equal approximately 42.88% return. Selling this stock now also generates a return 2.5 times the amount of the dividend yield if the stock was held for a whole year.

It is always recommended that when selling a stock, one should not place an order after hours or when the market is closed. This leaves the seller in the position of being vulnerable to the whims of the market makers. Instead, place your sell orders only as a market order during market hours. Some would complain that a market order during market hours might leave some profits on the table. However, I would rather leave some money on the table rather than have it taken away from me by the trades that are placed by institutions and market makers.

If you’re curious about the rational behind such short-term transactions then please visit the About This Blog section. Touc.

Email our team

Research: CenturyTel (CTL) at $33.47

Today's Dividend Achiever Research recommendation is on CenturyTel (CTL). According to Mergent's Online, "CenturyTel is an integrated communications company engaged primarily in providing an array of communications services, including local and long distance voice, Internet access and broadband services. Co. also provides fiber transport, local exchange carrier, security monitoring, and other communications and business information services. Co. conducts its operations in 25 states located in the continental U.S. As of Dec 31 2007, Co.'s local exchange telephone subsidiaries operated approximately 2.1 million telephone access lines, primarily in rural areas and small to mid-size cities in 24 states, with over 68.0% of these lines located in Missouri, Wisconsin, Alabama, Arkansas and Washington."

According to Yahoo quotes, CenturyTel (CTL) is now trading 6% above the 1 year low making this a timely investment opportunity. On a technical basis, CTL is trading above its $33 support from 1999. Such a technical support level from so far back in time indicates that the worst case scenario is that this stock will likely trade down to the 25 level but not go much further.

On the upside, CenturyTel (CTL) seems capped at the $50 level as far back as 1999. After hitting $50 in 1999, 2000 and 2007 the next run will be back to $50 with serious implications. An ascent back to the $50 level will occur with either a MAJOR breakout to the upside or a total collapse of the price. Either way this is a stock to watch with short term trading and long-term investing opportunities.

According to Valueline, CenturyTel (CTL) normally trades at around the 5x cash flow. If CTL were to trade at 5x based on last year's cash flow it would be trading at $41. Keep in mind that Valueline, from 1985 to 1997, used to have CenturyTel (CTL) trading at 8x cash flow. At 8x cash flow, CenturyTel (CTL) would be trading at a mean price of $64. We have to take the conservative route on this and project towards the $41 level.

Another compelling element of CenturyTel (CTL) is the fact that shares outstanding have decreased from 144 million down to the 108 million. All this at the same time that long term debt from 2003 to 2007 also decrease from 47% of equity to 44% of equity. Meaning, the company isn't taking on more debt solely for the purpose of reducing shares outstanding reflecting good management policy. Also, of particular interest is the fact that CTL is trading at 6% above book value.

Take the time to do the research on this stock and learn something new about the market for rural telephone service. After doing the research you too might be convinced that this company with its 31 years of dividend increases proves it is a quality short and long term investment. Touc.

Email our team