Windstream’s Dividend: Is A Cut Looming?


INTRODUCTION:

There is a persistent concern that Windstream’s (WIN) dividend is not sustainable, reflected in a yield of over 12% at the time of this writing. A major unknown involves future cash tax requirements as discussed on the 4Q12 conference call:

Batya Levi – UBS: So just looking out into ’14, can you help us with your expectation for cash taxes? … with the other tax benefits you received this year, will they reverse next year? Do you think $250 million in cash taxes is sort of a ballpark to use for ’14?

Tony Thomas – Chief Financial Officer: We’re not going to provide specific guidance as it relates to 2014. We have several initiatives underway to help minimize cash taxes in 2014, and that remains one of our principal focuses this year early in 2013, is to address that 2014 cash tax bill.

Goldman Sachs and UBS share the concern 2014 cash taxes could be several hundred million more than 2013. The tax issue remains unanswered.

On the other side management is aware of the anxiety surrounding the dividend and their rhetoric as recently as the 2Q13 conference call is targeted at increasing confidence in the sustainability of the dividend:
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