Rabu, 11 Juni 2025

This 8% Yielder Made the Deal of the Century

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Can Cogent Communications Keep Its Incredible Dividend Streak Alive?

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

Cogent Communications (Nasdaq: CCOI) is a telecom equipment provider that owns more than 300,000 miles of fiber-optic cable, which service nearly 300 major markets around the globe.

The company's 8.4% yield is impressive, as is its streak of raising its dividend every quarter - yes, every quarter - since it began paying one in 2012.

Chart: Is the Streak Coming to an End?
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However, a deal that has the potential to transform the company is also wreaking havoc on its ability to fund its dividend.

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In 2023, the federal government required T-Mobile and Sprint to divest certain assets in order for their merger to go through. Cogent took over those assets and - in the deal of the century - was even paid to do so. But once the deal was complete, it required an infusion of capital for Cogent to upgrade the network.

It's like those deals you may have heard of where a town in Italy will pay you to move there or give you a house for next to nothing, but you have to commit to fixing up the place.

Anyway, the additional capital expenditures resulted in Cogent's free cash flow going negative.

Last year, the company had a net outflow of $204 million in cash - and that doesn't include the $189 million it paid out in dividends.

Based on those figures alone, the outlook for Cogent's dividend looks pretty bleak.

But it's not all bad...

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