Qwest Buyer CenturyLink Prepping Near-Record Dividend

CenturyLink, the Monroe, La.-based service provider thats buying Qwest Communications International Inc., will pay investors a dividend of 0.725 per share on Sept. 20.

The amount far outweighs Qwests two-and-a-half year history of payouts totaling 8 cents per share. CenturyLink also paid 0.725 per share for the first quarter of this year.

CenturyLink has issued dividends every quarter since 1997. The highest came to $1.33 in the third quarter of 2008; 0.725 marks the second-highest figure. Indeed, the dividend activity surpasses that of Qwests, news that should excite Qwest stockholders. Qwests dividend has stagnated at 8 cents per share each quarter since February 2008. And that was after Qwest didnt pay dividends for six years because it was too weighed down by $26 billion in debt, incurred during the dot-com boom.

Unless Qwest shareholders happen to own CenturyLink stock, though, they wont benefit from this dividend. The operators $22.4 billion transaction which includes $11.8 billion of Qwest debt wont close until at least early 2011. When that does happen, Qwest shareholders will receive 0.1664 shares of CenturyLink for each Qwest share; CenturyLink investors will own just more than half of the combined company. 

Together, CenturyLink and Qwest will reach 37 states with in-house broadband and wireline services, and outsourced video and wireless products. CenturyLink will also be the third-largest carrier in the United States serving business markets. It plans to run a lean operation, saving $575 million in three to five years by cutting capex, overhead costs, and duplicate jobs and systems.

To receive dividend money, shareholders must be on record as of Sept. 7, CenturyLink said on Tuesday. Shares of CenturyLink had risen 8 cents by early afternoon, reaching $35.99. Shares of Qwest were down a penny, at $5.64.