Will Windstream's Dividend Still Stand After This Quarter?

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    Published Thu, 09 Aug 2012 03:28:17 GMT on The Motley Fool


    Three months ago, Windstream (Nasdaq: WIN) missed analysts' first-quarter earnings estimates by a penny. That disappointment pushed the stock into a 14% freefall between earnings-release eve ($11.26) and the second day after the announcement ($9.48). That was the bad news.
    The good news, for those addicted to Windstream's generous dividend payouts, was this statement by CEO Jeffery Gardner during that quarter's conference call: "We feel so good about our ability to pay this dividend for a very long time. ... [T]he cash flow generation capability of this business we've never felt better about."
    That's great, but how does Gardner define "a very long time"? Will the current 10% yield still be available beyond the upcoming second-quarter earnings release?
    Will it have to do what another second-tier telecom, Frontier Communications (Nasdaq: FTR), had to do to make up for the debt it had incurred in its acquisition spree? Frontier had tripled its size two years ago by buying a mess of Verizon's (NYSE: VZ) cast-off resources.
    Frontier investors had become quite used to high double-digit returns over the years, and they had the vapors when the carrier halved its dividend starting in the first quarter of this year.
    Windstream, too, had made some pricey acquisitions recently. The finalization of its purchase of PAETEC for $2.3 billion gave it a national fiber footprint, but that deal could just as easily gone sideways. Some PAETEC shareholders weren't happy with the amount Windstream offered and threatened to sue.
    The differences were eventually settled, but investors were a bit nervous about seeing the company spend so much money. So when that deal was finally settled, Windstream CFO Anthony Thomas also felt it necessary to reassure investors. During the Q3 2011 conference call, he said, "[T]he steps we are taking ... [will] provide security toward the most attractive dividend yields in the S&P 500."
    Some things to watch for in Windstream's upcoming earnings release will be just how much that PAETEC acquisition has contributed to the top and bottom lines, and just how much cash flow the company can generate. Will the numbers back up Gardner's confidence in his company's "cash flow generation capability"?
    For many investors, dividends are of supreme importance, and companies like Windstream and Frontier are certainly hard to resist. Their dividends have provided some of the highest yields in the market, and Frontier -- even after that traumatic cut in its dividend earlier in the year -- still yields almost 9%. For Frontier's complete story, sign up for this report. It's a must-read for anybody with an interest in Frontier.... Read more

    Stock name                                     ISIN Last trade   P/E Earnings/Share Dividend/Share Dividend yield
    WINDSTREAM P/E of WINDSTREAM on Bloomberg Quote of WINDSTREAM on CNNMoney FT.com - WIN:NSQ P/E ratio of WINDSTREAM on Google Finance Dividend yield WINDSTREAM on Morningstar Dividend WINDSTREAM on MSN Money Dividend WINDSTREAM on Reuters WINDSTREAM dividend US97381W1045 8.69   31.8 0.27 1.00 11.51
    FRONTIER COMMUNICATIONS P/E of FRONTIER COMMUNICATIONS on Bloomberg Quote of FRONTIER COMMUNICATIONS on CNNMoney FT.com - FTR:NSQ P/E ratio of FRONTIER COMMUNICATIONS on Google Finance Dividend yield FRONTIER COMMUNICATIONS on Morningstar Dividend FRONTIER COMMUNICATIONS on MSN Money Dividend FRONTIER COMMUNICATIONS on Reuters FRONTIER COMMUNICATIONS dividend US35906A1088 4.39   27.2 0.16 0.40 9.11
    VERIZON COMM P/E of VERIZON COMM on Bloomberg Quote of VERIZON COMM on CNNMoney FT.com - VZ:NYS P/E ratio of VERIZON COMM on Google Finance Dividend yield VERIZON COMM on Morningstar Dividend VERIZON COMM on MSN Money Dividend VERIZON COMM on Reuters VERIZON COMM dividend US92343V1044 51.89   129.5 0.40 2.06 3.97

    WINDSTREAM - WIN  


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