CenturyLink Inc. (NYSE: CTL) is a very controversial telecom stock. It is highly shorted, in part because of its major dividend yield being among the highest of any stocks in its peer group. So what happens when you see an analyst upgrade a stock like this? The timing of the upgrade should raise some eyebrows.

CenturyLink has a short interest of 41.8 million shares. This represents a whopping 8.5 days to cover. The driving force for such a battleground stock is that CenturyLink has a dividend yield of close to 7.5%.

The stock was raised to Outperform from Neutral at Macquarie on Tuesday, and the price target was raised to $33 from $31, after closing at $28.93 on Monday. Fitch Ratings also affirmed its BB+ rating with a Stable outlook late on Monday.

The $2.16 annualized dividend compares to earnings estimates of $2.68 per share for 2013 and $2.66 in earnings per share expected in 2014.

Why the timing of this upgrade should matter so much is because CenturyLink reports earnings on Wednesday. For an analyst to come out with an upgrade a day before earnings, it requires serious guts or serious conviction. Now add on that it is such a controversial stock on top of it. This makes you wonder if someone has a crystal ball.

CenturyLink shares were up 2% at $29.55 in late morning trading on Tuesday. Its 52-week trading range is $27.93 to $42.01, and the consensus price target is closer to $35.50.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.