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Lumen Technologies Is Not Worthy of Investing as Growth Slows

Lumen Technologies (NYSE:LUMN) stock, formerly known as CenturyLink, is not going to be worth investors’ capital. This is despite recent earnings which provide some reason for optimism. Some investors might want to show Lumen Technologies some optimism and invest their capital. 

A magnifying glass zooms in on the website for Lumen Technologies (LUMN).
Source: Postmodern Studio / Shutterstock.com

But take a long-term view on this stock and let it be. 

The Reasons to Like LUMN Stock

Investors might be attracted to Lumen Technologies for a few key reasons. The telecommunications firm provides high-speed internet, fiber, voice, phone, and TV for businesses and residential customers. 

It has authoritative voices behind it, which is one reason to consider investing. In fact, it was recently named to Gartner’s Magic Quadrant for Network Services, Global. That makes it the second consecutive year in which Lumen Technologies has made the prestigious list. 

Gartner judges firms across multiple sectors and industries on two criteria: Completeness of vision and ability to execute. One would think that such high praise might translate to increasing stock prices. That hasn’t been the case, though. 

Another reason to potentially like Lumen Technologies is its dividend. It is a good one as far as having a high yield can be considered ‘good.’ The dividend yields 9.36% today. For its part, Lumen Technologies seems to be committed to maintaining that dividend. It is one of the company’s key allocation priorities. 

 If Past is Prologue

The company has an unfortunate history in this regard: That dividend which the company claims to so ardently seek to maintain has been decreased in the past. Most recently, the company slashed the dividend in 2019. That cut took its dividend price from 54 cents all the way to 25 cents. That is where the company has promised to allocate capital as a priority. But who knows?

The company slashed the dividend from 72.5 cents to 54 cents in 2013, as well. That past makes it fairly difficult to believe the company when it claims the dividend is among its ‘key capital allocation priorities.’

So, it is really a mixed bag. The dividend is undeniably attractive with a yield approaching 10%. But investors really need to consider the company’s track record in that regard. The risk is fairly straightforward. Investors could rush into LUMN stock on the perceived strength of that dividend only to see the company turn around and decrease it. 

That is one issue that should at least remain in the back of investors’ minds.

Growth Prospects 

The bigger problem with the company is growth prospects. And based on future expectations about the company, I can’t see why investors would currently be interested. Yahoo! Finance lays out some fairly stark numbers in that regard. 

Sales are expected to slow by 11.2% this year. And next year, they’re anticipated to slow a further 8%. That means the company’s $17.49 billion in anticipated revenues this year, already an 11.2% slow down, are expected to get worse.

Shareholders in Lumen Technologies can expect company-wide sales to taper off to $16.08 billion by the end of 2023 based on current predictions. That is hardly news any investor should be positive about. 

What to do With LUMN Stock

Investors are concerned about Lumen’s slowing sales. They showed as much when the firm released its most recent earnings. Total revenues dipped 5.4% in the fourth quarter on a year-over-year basis. 

That sent share prices from near $13 to $10. That is the kind of future investors are looking at if they invest in Lumen Technologies. It is in a period of significantly slowing growth.

Growth is a significant concern for Lumen Technologies. The long-term does not look strong in that regard. On top of that, Lumen Technologies posted declining growth numbers recently. No matter the market, slowing growth does not play well. So, don’t be tempted by LUMN stock and its dividend. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks.Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.


Article printed from InvestorPlace Media, https://investorplace.com/2022/03/lumn-stock-is-not-worthy-of-investing-as-it-slows/.

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