Windstream stock weakened earlier this year when it reduced its revenue growth forecast. The primary reason was integration-related challenges related to the acquisition of Paetec, including longer-than-anticipated
times needed to close contracts. That sparked criticism that the company’s policy of investing 11% to 13% of cash flow back into the business is too low, and that a dividend cut would be needed to right the balance.
Others opined that a cut could save cash to cut debt more quickly to management’s stated target of 3.2 to 3.4 times annualized cash flow.
At a series of analyst meetings held last month, CEO Jeffery Gardner adamantly refuted those claims, stating the company is on track with cost cutting and the integration of Paetec. We’ll no doubt hear from the
shorts as we approach November 7, when the company will announce third-quarter results. The 12% dividend, however, definitely bakes in a lot of risk for a company that nonetheless seems to be on the come. Windstream is a buy for patient, aggressive investors up to 9.
Roger Conrad, Conrad’s Utility Investor, www.ConradsUtilityInvestor.com, 888-960-2759, October 2013
