The future looks bright for Windstream investors.
So says William Alder, writing for financial blog site The Motley Fool. Alder, who has no affiliation with the communications giant, beats back critics who say Windstream's debt makes its $1 per share annual dividend unsustainable.
Alder notes that the Little Rock, Ark.-based company was able to generate $70 million in free cash flow last quarter ($248 million adjusted). For all of 2012, the number was $676 million. That stat, plus plans to reduce CapEx this year, should help Windstream maintain the dividend, Alder wrote.
The blogger also likes the fact that Windstream continues to diversify its business through organic growth and via integration of its acquisitions that have made it stronger in broadband and data-center services. A partnership with Avaya to expand managed unified communications services is also a leg up for the company, which should drive higher revenues.
"I do not think Windstream will be cutting the dividend anytime in the near future," Alder wrote. "Management is strongly against it and has said so on many occasions. The financials still work for the company to continue paying. The strategy of acquisitions and partnerships to be a strong player in growing sectors is providing the revenue to both pay down the debt and provide for the dividend. Finally, the risk of investing in this stock right now is low. A dividend cut appears to be already priced in to the stock, so a dividend cut, as unlikely as it is, will not send this stock into a deep 15%+ drop. All this means good times for the Windstream investor."
Windstream's stock price is down about 9 percent for the year, falling from $8.80 on Jan. 2 to $8.10 at the market close on July 19.
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