Why CenturyLink Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of CenturyLink have plunged today by as much as 23%, tapping fresh 52-week lows in the process, after the company reported earnings and slashed its dividend.

So what: Total revenue in the fourth quarter came in at $4.6 billion, which translated into adjusted earnings per share of $0.67. Both figures were exactly on target with consensus estimates. Of greater concern was soft guidance and the dividend reduction.

Now what: Full-year 2013 is expected to generate adjusted earnings per share of $2.50 to $2.70, making the midpoint short of the $2.64 per share expectation. CenturyLink has revised its capital allocation strategy and the board has authorized a $2 billion stock repurchase program while simultaneously revising its quarterly dividend from $0.725 per share to $0.54. That's a 25% reduction in how much cash it gives back to shareholders, and investors are none too happy about it.

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The article Why CenturyLink Shares Plunged originally appeared on Fool.com.

Fool contributor Evan Niu, CFA, has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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