Uncertainty Threatens Windstream Dividends

by Luke Jones  on Monday, Nov. 18, 2013 12:00 am  

Jeff Gardner, CEO of Windstream, says the company has transitioned to new revenue streams, but not all analysts agree. (Photo by Russell Powell)

Analysts Weigh In

So, given the company’s lackluster earnings and Morgan Stanley’s downgrade, how well is that confluence working for the company?

Donna Jaegers, an analyst at D.A. Davidson of Great Falls, Mont., said the cash flow generated by growth in Windstream’s business services sector fuels the company’s high-yield dividend. (See Dividend Changes below.)

But that growth hasn’t been too great.

“That was actually a little weaker in the last few quarters,” she said.

Pressure is coming from other cable-focused companies, like Earthlink and Time Warner, aggressively growing their small-business customer base — customers with billings of $750 or more per month.

“They’ve been preparing for that, but that continued pressure from the low end continues to erode the cash flow Windstream is getting from smaller business customers,” she said.

Jaegers, however, still rates Windstream stock as a “buy.”

“The thing people aren’t looking at, with the broadband builds done in the last few quarters, Windstream is going to be marketing to 75,000 households that haven’t had broadband access,” she said. “The next few quarters should have a lot better tone because of growing the DSL adds.”

She said the company is managing itself well in that area, and even though it was losing broadband customers, it was working on scaling up existing customers with faster speeds and more add-on services.

Barry McCarver, an analyst for Stephens Inc. of Little Rock, also still considers the hometown company a “buy.”

“I look at the third-quarter results as a meaningful headway moving the company in the right direction,” he said.



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