![]() ![]() Plus, they also face an uncertain long-term future in this age of clean energy and thus because share buybacks are effectively an investment back into the existing operations of the company, this creates uncertainty surrounding their medium to long-term tangible benefit. Most of the time when criticizing share buybacks, they are being conducted by oil and gas or coal companies, which unlike in this situation, face highly cyclical financial performance that risks seeing more conducted at cyclical highs and less at lows, thereby going against the old adage of buy low, sell high. Lumen Technologies Q3 2022 Conference Call (previously linked).Īnyone who is familiar with my articles over the years may recall that I often criticize companies focusing upon share buybacks over dividends and whilst yes, I always prefer dividends, I still see situations whereby the latter creates value or provides a tangible benefit. But we've also said that our Board regularly reviews whether that approach remains aligned to the current circumstances." ![]() "Returning value to shareholders is a key priority for Lumen, and we believe the dividend is an appropriate value delivery mechanism. Despite leaving their shareholders without cash flowing directly into their pockets, thankfully, reinstating their dividends is still not off the table forever, as per the commentary from management included below. Whether you love or hate this choice, management feels share buybacks will provide a better path to creating value for shareholders and are seemingly intent upon completing their $1.5b program across the next two years, thereby amounting to $750m per annum. Lumen Technologies Q3 2022 Conference Call. "Earlier today, we announced that we are eliminating our dividend and instituting an up to $1.5 billion two year share buyback program." Regardless of whether sitting in the bull or bear camp, alas, many investors were caught off guard when their dividends were not simply cut but rather, suspended in favor of share buybacks, as per the commentary from management included below. Throughout the last few years, their high single-digit to low double-digit dividend yield often caught the attention of many income investors, although concerns regarding its safety always persisted and were often debated. ![]() Even though this is a very disappointing end to the year, I feel it is actually a win-win for income investors when considering the flow on impacts of their new shareholder returns policy in the medium to long-term. When Lumen Technologies ( NYSE: LUMN) suspended their dividends in favor of share buybacks back in November 2022, the reaction from the market was both swift and brutal with their share price instantly plunging more than 10% on the news and thus far since, continuing to remain under further selling pressure. Ralf Geithe/iStock via Getty Images Introduction ![]()
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