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Cogent Communications (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.

However, a deal that has the potential to transform the company is also wreaking havoc on its ability to fund its dividend.

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.

In 2025, Wall Street forecasts free cash flow to rise to -$8 million, so things are moving in the right direction. But with $197 million in dividend payouts expected, the company will still need to dip into its $154 million in cash to cover some of the dividend and either sell shares or borrow money to pay the rest.

Oxford Income Letter readers know that the stock is currently rated “Hold” in our portfolio, as we’re waiting for another quarter’s worth of results to better determine whether the company will be able to generate positive cash flow in 2026.

It may be fairly easy for Cogent to raise cash, because free cash flow is projected to turn positive in 2026 and grow from there.

But in the short term, the negative free cash flow means the dividend cannot be considered safe.

Dividend Safety Rating: F

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