UPDATE: High Dividend 50: Cogent Communications Holdings

Updated on October 30th, 2025 by Felix Martinez

High-yield stocks pay dividends that are significantly higher than the market average. For reference, the S&P 500’s current yield is only ~1.2%, which is low on an absolute basis and relative to the index’s historical values.

High-yield stocks can be very helpful to shore up income after retirement. A $120,000 investment in stocks with an average dividend yield of 5% creates an average of $500 a month in dividends.

You can download your free full list of all high dividend stocks with 5%+ yields (along with important financial metrics such as dividend yield and payout ratio) by clicking on the link below:

Next on our list of high dividend stocks to review is Cogent Communications Holdings, Inc. (CCOI).

The company has a respectable 13-year streak of dividend increases. The yield is extremely high today at about 9.4%, but the dividend’s safety is far from assured.

Business Overview

In 1999, Cogent Communications Holdings was established on the basis that bandwidth could be traded and sold like any other good or service (i.e., a commodity).

The company provides small and medium-sized enterprises in 50 different countries with low-cost, high-speed internet access and private network services. The company accounts for a significant share of global internet traffic each year.

Cogent provides high-speed internet connections to two types of customers: corporate or “on net” customers, who account for the bulk of sales, and netcentric or high-bandwidth users, who generate the balance of revenue.

With its telecommunications services generating resilient, recurring cash flows, the company’s performance has remained robust over the past several quarters despite the tough market environment.

Cogent Communications (CCOI) reported Q2 2025 service revenue of $246.2 million, slightly down 0.3% from Q1 2025 and 5.5% from Q2 2024. Wavelength services showed strong growth, with revenue rising 27.2% sequentially and 149.8% year-over-year to $9.1 million. Leasing IPv4 addresses also grew, reaching $15.3 million. EBITDA increased 10.8% sequentially to $48.5 million, while adjusted EBITDA, accounting for Sprint acquisition costs and IP Transit payments, rose 6.9% to $73.5 million, reflecting improved operational efficiency. Total customer connections declined 7.8% year over year to 118,730, while on-net and wavelength connections continued to expand.

Cogent strengthened shareholder returns by raising its quarterly dividend by $0.005 to $1.015 per share, marking its 52nd consecutive increase. The company also boosted its stock buyback program, purchasing 293,000 shares in Q2 and July 2025 and approving a $100 million increase through 2026. These initiatives demonstrate Cogent’s commitment to returning capital to shareholders while continuing network expansion.

Operationally, the company leveraged the Sprint acquisition to expand its optical wavelength network across 938 data centers in North America. GAAP gross margin remained steady at 13.6%, with non-GAAP gross margin at 44.4%. Cogent’s focus on high-growth services like wavelength, coupled with disciplined cost management and strategic capital deployment, positions the company to maintain steady revenue streams and shareholder value despite a slight overall decline in total service revenue.

We see the company with an adjusted earnings-per-share target of 42 cents, with some extremely volatile earnings performances in recent quarters.

Growth Prospects

Cogent’s earnings-per-share generation has been quite erratic over the last ten years. Earnings per share have ranged from $0.02 in 2014 to $26.88 in 2023.

Income tax expenses, unrealized FX gain on euro notes, and debt redemption losses have contributed to net income’s wild swings. The bumper earnings in 2023 were due to a bargain purchase gain from an acquisition, not sustainable operating earnings.

The company’s performance is thus better assessed through its adjusted operating earnings, which serve as the metric for these one-off items, along with its capital expenditures. Cogent had seen years of reasonably strong operating earnings growth, but that ended in 2024 with an operating loss of $180 million.

Revenue is on the rise, and the company is attempting to get operating costs under control. These factors should help margins over time, but we also note that the most recent quarter saw very weak customer numbers, meaning top-line growth and the margin expansion that could come with it will be tougher to achieve.

We’re estimating 4% growth from 2025 levels, but this is more of a reversion-to-the-mean estimate than outright growth. We’re concerned about customer losses and see the road ahead for earnings as bumpy, to say the least.

Competitive Advantages

Cogent offers narrow product sets, which can have significant cost advantages compared to telecommunication majors, whose offerings are generally broad.

The company’s transmission and network operations rely mainly on two sets of equipment, enabling greater control and superior delivery. While they have tens of thousands of corporate connections, this accounts for only 5% of the market, compared to the 95% they own with net-centric customers.

This gives them plenty of capacity to attract new customers. Still, we note that this hasn’t always translated into big customer growth, and indeed, Cogent has had plenty of periods when it has been ceding customers.

The fact that the corporation increased its dividend every three months during the COVID-19 pandemic should illustrate the resilience of its business model, even though the company’s ability to weather recessions in terms of payouts has not yet been tested.

Still, due to the nature of telecommunications, we would expect relatively robust results during a potential recession.

Dividend Analysis

In the last decade, Cogent has boosted its dividend by an average of about 15% annually, which is extremely impressive. Management is firmly committed to returning cash to shareholders, but with recent operating losses piling up, the dividend may not be as safe as it once was.

Cogent’s earnings per share have never, in the past decade, actually covered the dividend. That is the case today as well, but we note that Cogent’s cash available to pay the dividend is much closer to operating earnings than to earnings per share.

Even so, trailing-twelve-month operating losses have totaled nearly $162 million, and the dividend costs about $180 million annually. Given the company’s balance-sheet leverage, we believe the dividend will become increasingly difficult to pay.

Free cash flow was positive each year until 2023 and remains negative on a trailing-twelve-months basis today. We suggest investors keep a close eye on this, as it may result in tougher conditions for paying the dividend going forward.

Final Thoughts

Income investors are likely to appreciate Cogent’s 10% dividend yield and its history of frequent dividend increases. Cogent’s dividend, in our view, could be at risk over time as operating earnings and cash flow numbers have deteriorated significantly in recent quarters.

Cogent’s inherently defensive business characteristics are a source of strength from a dividend investor’s perspective, but we note that conditions have deteriorated for the company. The declining share price suggests an elevated yield, but it could also signal a warning of the dividend’s sustainability.

If you are interested in finding high-quality dividend growth stocks and/or other high-yield securities and income securities, the following Sure Dividend resources will be useful:

High-Yield Individual Security Research

Other Sure Dividend Resources