Cable One’s Bold Gamble: Can Sacrificing Dividends Spark a Broadband Renaissance?

Cable One (CABO) is making a high-stakes bet. After suspending its dividend to prioritize debt reduction and invest in growth initiatives, the company is betting its future on new products like FlexConnect and Internet Lift to reverse subscriber losses and reignite broadband revenue growth. The question investors must ask: Is this a shrewd pivot or a desperate gamble?

The Strategic Rationale: Sacrificing Dividends for Survival

Cable One’s Q1 2025 results were grim: revenues fell 5.9% to $380.6 million, net income plummeted 93%, and residential broadband subscribers declined due to “unusual churn events.” But management’s response was audacious: suspension of its dividend to free up $67 million annually for debt reduction and infrastructure upgrades.

The move isn’t just about cost-cutting. Cable One is shifting its strategy to compete aggressively in a changing market. With legacy video revenues collapsing (down 15.8% year-over-year), the company is doubling down on broadband and enterprise fiber—a segment that grew 1.2% despite overall declines.

The linchpin? Two new products:
- FlexConnect, a pay-as-you-go broadband plan targeting price-sensitive customers, which early pilots show can boost acquisition rates.
- Internet Lift, a subsidized offering for income-eligible households, designed to capture underserved markets without cannibalizing existing customers.

CEO Julie Laulis emphasized that these products are part of a “multi-year plan” to rebuild subscriber growth. Early signals are mixed but hopeful: SecurePlus, a security-focused add-on, saw 15% adoption growth since early 2025, proving customers will pay for value-added services.

The Execution Risks: Can CABO Turn the Tide?

The strategy hinges on two critical assumptions:
1. Subscriber Declines Are Temporary
Q1’s 21,700 net subscriber loss was partly due to operational hiccups, including a billing system migration and fixed wireless tower outages. Management claims churn has stabilized, but competition from fiber (AT&T, Verizon) and fixed wireless (Starlink) remains brutal. If FlexConnect and Internet Lift fail to attract customers at scale, the subscriber bleed could worsen.

1. Debt Reduction Doesn’t Limit Flexibility
   While cutting the dividend frees up cash, Cable One’s debt remains hefty: $3.57 billion as of March 2025. Management insists the net leverage ratio will stay below 4x, but rising interest rates and a slowing economy could squeeze margins further.

(Note: CABO’s shares have dropped 35% since late 2024, reflecting investor skepticism about its turnaround plan)

The Valuation Case: A Margin of Safety, But…

At an EV/EBITDA of just 1.1x, Cable One is trading at a valuation typically reserved for distressed companies. For context, peers like Charter Communications (CHTR) trade at ~4.5x EV/EBITDA. Even if Cable One’s revenue stagnates, its valuation suggests the market has priced in a worst-case scenario.

The upside is massive if the strategy works:
- Debt Reduction: A lower leverage ratio could unlock cheaper financing, easing pressure on cash flow.
- Revenue Reversal: If broadband revenue grows 5% in 2025 (a plausible target given product rollouts), it could offset declines in video and stabilize EBITDA.

The Bottom Line: Buy the Dip, But Watch for Proof

Cable One’s pivot is a high-risk, high-reward play. The dividend cut and debt focus are rational moves, but execution is everything. Investors should take a small speculative position here, with a focus on near-term catalysts:
- Subscriber trends in Q2/Q3 2025: Any stabilization or growth in broadband adds credibility to the strategy.
- FlexConnect adoption rates: If the product drives net adds above 10,000 per quarter, it’s a win.
- EBITDA stability: A flat or rising Adjusted EBITDA (now $202.7 million) would signal operational discipline.

Final Verdict: Buy CABO if you’re willing to bet on a turnaround, but keep a close eye on execution. The 1.1x EV/EBITDA offers a margin of safety, but success hinges on whether Cable One can outmaneuver fiber giants with its new offerings. This isn’t a “buy and hold” stock—it’s a high-stakes call on management’s ability to innovate in a crowded market.

Act now if you believe in the plan. Wait if you need proof.