CenturyLink Inc. (NYSE: CTL) is proof that investors should never just pile into a stock because it has a high dividend yield. It turns out that not all dividends are created equal, and some companies have leveraged balance sheets or are paying dividends out of cash flows rather than from true net income. CenturyLink reported mixed first-quarter results, and an analyst upgrade and the news that the company is exploring a sale of its consumer business segment has not prevented the shares from sliding lower.

CenturyLink said it had $0.34 in earnings per share on $5.65 billion in revenues for the period. The consensus estimates were $0.26 EPS and $5.71 billion in revenues. The company’s free cash flow from normalized operations fell to $315 million from a much higher $941 million in the same period of 2018.

CenturyLink did reaffirm its 2019 guidance for earnings before interest, tax, depreciation and amortization (EBITDA) of $9.0 billion to $9.2 billion. The company also sees free cash flow in a range of $3.1 billion to $3.4 billion.

The reaction to this earnings report is just one additional wake-up call for high-dividend chasers. CenturyLink shares were down about 30% since the end of 2018, and they were down about 45% from this time a year ago. It is no secret that the wireline industry has to deal with falling revenues and troubled balance sheets. One issue plaguing the story at CenturyLink has been delayed regulatory filings and turnover of executives. Even after slashing its dividend in half in recent months, investors are not really rewarding CenturyLink for using those financial savings of cutting its old dividend to help to pay down debt on the heels of its Level 3 Communications acquisition.

Despite a flurry of analysts cutting their price targets in recent months and over the past year, Citigroup’s Michael Rollins reversed his downgrade from February by raising his official analyst rating to Neutral from Sell. With an $11 price target, most investors will hardly consider this to be great news. Rollins is skeptical that separating the consumer business from the larger wholesale and commercial operations will unlock significant value here. He further worries that continued revenue declines are likely to keep pressure on the multiples that investors use to value a company’s prospects.

Rollins even noted that investors just seeking high dividends probably should give a stronger look to AT&T Inc. (NYSE: T) or Verizon Communications Inc. (NYSE: VZ) as more stable payers. There is a reason if you look at the financial figures below.

In midday trading, CenturyLink shares were down almost 6.3% at $10.70, in a 52-week range of $10.31 to $24.20. That 52-week low was seen earlier in the day. CenturyLink’s $1.00 annualized current dividend would generate a yield of 9.3%.

Even after cutting that former $0.54 quarterly payout ($2.16 per share annualized) that had been static since 2013, the Refinitiv consensus analyst earnings per share estimates are $1.19 for 2019 and $1.29 in 2020. With a 2018 year-end long-term debt level of $35.4 billion and with the company paying down debt (to $34.86 billion at the end of the first quarter of 2019), any hiccup in the business at all could create a fear that CenturyLink may have to revisit yet another dividend cut at some point sooner rather than later.

AT&T shares have been weak as well, but even with a $220 billion market cap today, its shares are still down by about one-third from back in 2016. Investors still feel its $2.04 annualized dividend (with a current 6.7% yield) is safe despite some core business erosion. The consensus earnings estimates are $3.59 per share in 2019 and $3.66 per share in 2020. That said, AT&T ended its March 2019 quarter with a whopping $182.2 billion in long-term debt and $353.4 billion in total liabilities.

Verizon shares have held up better than AT&T, with less of a diversified acquisition strategy on scale as its shares are up over the past five years. At almost $56 a share, this stock has a 52-week range is $46.52 to $61.58. Verizon has a $231 billion market cap, and its $2.41 annualized dividend per share generates a current yield of 4.3%. Verizon’s long-term debt was less than half of AT&T’s as of March 2019 with a $124.6 billion balance, and its total liabilities were listed as $226.5 billion.

CenturyLink’s market cap is now down to $11.7 billion, and the stock has lost nearly 75% of its share value over the past five years, when its shares peaked at about $41.50. This was nearly a $50 stock in 2007, prior to the Great Recession.

When Neel Dev, CenturyLink’s executive vice president and chief financial officer, reiterated 2019 guidance on EBITDA and cash flows, he said: “Looking back at the first quarter 2019, we are off to a good start in capturing synergy and cost transformation savings.”

A drop of more than 6% and hitting a 52-week low when the S&P 500 is less than 4% from its all-time high is not as optimistic as Dev’s outlook.

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