GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Windstream Is A Risky Investment

April 30, 2014 | About:



Windstream (WIN) is in a tough situation. Though it is one of the major rural exchange carriers in the U.S., it is expecting a decline in its position as its earnings are slated to decline at a CAGR of 20% in the next five years. This is disappointing for Windstream as this decline can harm the company’s dividend. However, Windstream is working on narrowing down expenses in order to maintain its dividend.

Windstream is facing tough times ahead and its prospects also look depressing. Even in the past, the company suffered with its poor earnings. Also, its share prices were down by 24% in the last one year, so it can be estimated that its dividend might be cut in the future.

A few positives

Despite Windstream’s woes, there are certain key points on which the company looks good. Investments in the fiber-to-the network, broadband network, proper expense management, and a capital-efficient business model in the future might prove to be primary growth drivers for the company. Windstream has already started investing aggressively in fiber-to-the-tower deployment and broadband network capability. The company’s new service offerings to businesses such as VoIP services, data bundles, cloud and managed services are expected to drive the business higher in the future.

Windstream is continually focusing on providing utmost customer satisfaction by adding data centers to support cloud-based services. In continuity, Windstream is also investing in different business channels. Besides this, Windstream is aggressive in its expansion strategy by enhancing its broadband coverage and surfing speed. It is also with ramping up its FTTT construction. Also, Windstream sees a boost in its revenue with the addition of 75,000 new broadband addressable lines.

In addition to this, Windstream’s expansion strategy also includes investment in business services, data services, internet services and customer broadband as an add-on to its landline telephone services. Moving ahead, Windstream is planning to improve its operational efficiency and has planned to cut down its workforce by 400 employees, thereby saving $20 million per day.

Looking at the dividend

Windstream has always been impressive on its dividend payout by paying 11.30% as a yield. But the poor expected earnings growth and the decline in the revenue might result in a fall in the dividend. Also, the cash position in the balance sheet which is $73.40 million disappoints, while it has huge debt of $8.93 billion, which is double of its market capitalization.

To maintain its dividend payout, the company should avoid offering any more shares. It should also work on decreasing its expenditures, thereby decreasing the payout ratio. Moreover, the company has many growth oriented moves, which could lead it to gain market share in the future.


Thought Windstream’s dividend is still catchy, but with the poor results and prospects, the company is in not in good health. Thus, investors should stay away from this company as there is no guarantee that it will be able to sustain its dividend for the long run.

Rating: 0.0/5 (0 votes)


Please leave your comment:

Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
Email Hide