Is It Time To Buy Into Windstream’s Very High Yield?


INTRODUCTION:

In our last article we concluded that, “Waiting to see how the second half develops may be the prudent path before allocating new or additional cash toward this investment.” The stock was trading at $9.41. Now that the second half is complete here is an update.

Management seems to have gone out of their way in an effort to reassure investors the dividend will not be reduced.  Jeff Gardner – Chief Executive Officer, made this comment on the Q4 conference call:

let me reiterate that it is our expectation to maintain our current dividend practice.

This could be interpreted as a strong statement assuring investors the dividend is safe although expectations usually change as future events unfold for better or worse.  Windstream’s (WIN) dividend yield exceeds 12% at the time of this writing.  The market is sending a clear message; the dividend is not sustainable.  Although the message is clear, is it possible the market has it wrong?

We’ll discuss the following in an attempt to answer the question.

  • Revenue stability
  • FCF (Free cash flow) and the growing dividend payout
  • Debt
  • Industry comparisons
  • Insider activity
  • Conclusion

Financial data used for this article can be found here.

REVENUE STABILITY

One problem the wireline industry faces is declining revenues.  We’ll look at the pro forma service revenue (includes NuVox, Iowa Telecom, Hosted Solutions, Q-Comm and PAETEC) and measure management’s performance using a “best fit” regression analysis. The curve reflects management’s efforts going forward based on performance over the last 3 years:
… Click here to continue reading the full article …

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About IIEX

Click "About" in the menu at the top for more information about the author. We also have a page at "Seeking Alpha" ( http://seekingalpha.com/author/david-klein ). Please Click on and read the "Disclaimer" in the menu at the top. Have a question? Contact us at iiex@live.com.
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