logo
  Join        Login             Stock Quote

Windstream (WIN): A Sweet Dividend Gets Safer

 January 22, 2013 09:45 AM
 


(By Kevin Donovan) Rarely does Washington ride to the rescue, but it recently snatched dividend darling Windstream Corp. from the tracks, giving shareholders a reason to hang on.  We think income investors with an appetite for risk could profit by joining them.

Since its spinoff from Alltel (itself subsequently bought by Verizon Wireless), business telecommunications and network provider Windstream has rewarded shareholders with a generous dividend.  With a debt-heavy balance sheet and shrinking cash flows, the sustainability of that payout has been a big concern for income-oriented investors.

However, free cash flow got a huge boost from the "fiscal cliff" deal, sending Windstream shares sharply higher as investors gained confidence the company can maintain its generous dividend.  The company recently lowered its 2013 tax expense guidance to $40-50 million from $250 million to reflect the extension of bonus depreciation into 2013 that resulted from the fiscal cliff deal.

[Related -Pitney Bowes (PBI): Is That High-Yield Stock Really A 'Dividend Trap'?]

Free cash flow fell to $99.5 million in the third quarter from $122 million and $212 million in the second and first quarters, respectively.  With a payout of about $147 million in dividends per quarter, the ratio of dividends to free cash flow was a troubling 148% in the third quarter, raising doubts about the sustainability of the $0.25 per quarter dividend, which at the current stock price yields an outsized 10.38%.   

But the last-minute tax deal will pour plenty of cash into the bucket used to pay dividends, providing a comforting cushion.

Meanwhile, though it's still early days for the technical minded,  we see a potentially bullish head-and-shoulders pattern since the stock hit a 52-week low in November, with the right "shoulder" shooting higher than its brother on the left.  The move has been dramatic with the stock rising more than 16% in just two weeks.   Also of note, insiders Dennis Foster, chairman of the board, and Jeffery Gardner, president and CEO, bought shares in November, hardly the harbinger of a dividend cut.
iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageXerox Corp. (XRX): An Insider’s $500,000 Insider Buy

Last week was a healthy week of insider buying as 194 companies reported purchase records. The number read on...

article imageQihoo 360 Technology Co Ltd. (QIHU) Q2 Earnings Preview: A Green Monday

Qihoo 360 Technology Co Ltd. (NYSE:QIHU) will report its second quarter 2014 financial results on Monday, read on...

article imageSix Stocks that Could Outperform in the next 90 days

Earlier today, Goldman Sachs put out its list of the 50 stocks that Matter Most. It’s a list of the 50 read on...

article imageFoot Locker, Inc. (FL) Q2 Earnings Preview: Running Past the Street View

Foot Locker, Inc. (NYSE:FL) plans to report financial results for its second quarter ended August 2, 2014 read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.