Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

December 31, 2009 - CenturyTel Inc. (CTL-NYSE) together with its subsidiaries, operates as an integrated communications company. The company provides a range of communications services, including local and long distance voice, Internet access, and broadband services in the continental United States. Its services include local exchange and long distance voice telephone, as well as enhanced voice, such as call forwarding, conference calling, caller identification, selective call ringing, and call waiting; network access services; data services, including high-speed and dial-up Internet services, and data transmission services over special circuits and private lines; and fiber transport, competitive local exchange carrier, security monitoring services, and other communications and business information services.

CenturyTel focuses on rural communities and is the fourth largest phone company in the U.S. It's been growing through acquisitions, buying Pacific Telecom in 1997, Verizon wireline assets in Alabama in 2002, Verizon wireline assets in Missouri in 2002 and Embarq Corp with 5.7 million lines in July of 2009.

It's growing physically and profitably. There were only 2 years in the last 17 when earnings were lower than the previous year. They were in 2000 and 2001 when earnings per share went from $1.65 in 1999 to $1.55, then to $1.40. But in 2002, they jumped to $2.27 and haven't been lower. Last year, they hit $3.37. Consensus from 11 analysts covering the company is for $3.46 this year, then $3.48 next year. Not great growth but still positive in an economy that has seen consumers cut back on almost everything.

Revenues will pop this year as the company adds the sales of its recent purchase of Embarq. Total revenues in 2008 were $2.598 billion. This year, they should be almost $5 billion, then go to $7.2 billion in 2010. With the merging of the two companies, cost savings should be $375 million every year within two or three years. Some of the economies of scale have already appeared in the human resources, billing, and financial departments.

It's not all good news with the Embarg buy. Customer losses have been noticable as this company competes in some urban areas in Nevada and Florida, places where there are plenty of alternative providers. But analysts expect better times ahead as the economy improves and CTL initiates its regional operating model, cusomizing services to compete with other providers for the same customer. Furthermore, the company has boosted its DSL capabilities, a service that added 43,500 high-speed customers in the third quarter, 52% ahead of last year's total.

Income investors will like the $2.80 annual dividend. That gives a current yield of 7.7%. The dividend takes 82% of earnings to pay. The company has plenty of free cash flow and should be able to pay the dividend comfortably. In fact, the company might resume its share buy back program if capital expenditures aren't too hefty.

More numbers: Market Cap is $10.86 billion. Trailing P/E is 10.55. Price to sales is 2.87. Price to Book is 1.16. Book value per share is $31.46. Operating margin for the last 12 months was 29.58%. Profit margin was 13.65%. Return on equity was 6.12%. There's $531.19 million in the bank for $1.78 per share. Total debt is $8.22 billion or about 44% of capital. Current ratio is .68. Beta is .79. The 52-week low was on March 9, 2009 at $23.41. The 52-week high was on December 7, 2009 at $37.15. There are 297.5 million shares outstanding. Insiders own 1.54%. Institutions have 84.2%.

- Company Web site: www.centurytel.com

Ted Allrich