We previously analyzed CenturyLink, Inc. (CTL) versus two other rural telecommunications companies – Frontier Communications Corporation (FTR) and Windstream Corporation (WIN) – and concluded that CenturyLink offered the best risk-reward scenario of the three rural telecoms. We followed up our first research report with another report that researched and analyzed CenturyLink’s steady business performance, strong generation of free cash flows, and growth potential from Savvis. In this report, we will focus primarily on CenturyLink because we feel that if we can devote a report to primarilyanalyzing Frontier Communications, we can most certainly devote a report to the rural telecommunication sector’s industry leader CenturyLink.

Even though CenturyLink has always had the lowest dividend yield of the rural telecom trifecta, we believe it is the best-in-breed in the rural telecom space. Granted this sector is dominated by three companies. But still, we believe that investors in the rural sector shouldn’t mind sacrificing 2%-3% current yield to buy CenturyLink instead of Windstream or Frontier because we believe that investors are more likely to see the return of their money, as well as incremental growth on their seed capital by investing in CenturyLink versus Windstream or Frontier. That’s precisely the reason why we still hold our long position in CenturyLink. We believe what makes Saibus Research special with regards to other dividend investors and investment professionals is we like to analyze how a company earns the money to pay us our quarterly dividends. We find that more important that merely grabbing the stated yield off Yahoo Finance.

After the market closed on August 8, CenturyLink reported adjusted Q2 2012 EPS of $.65/share, which beat the $.61/share analyst consensus and was an increase from the $.64 adjusted EPS achieved in Q2 2011. We weren’t surprised by CTL beating expectations. We weren’t surprised by CTL’s continued progress in stabilizing its revenue. CTL made a significant improvement in its adjusted pro forma revenue decline by reducing it to -1.22% for the quarter. While we are most certainly unhappy to see its wireline access lines decline by 6.05% year-over-year, it was still better than the 7.6% year-over-year decline in wireline access lines by Frontier.

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