Are These Lush Dividends In Danger?: CenturyLink, Inc. (CTL) and More

What about Windstream?

It’s not a question of if but a question of when for Windstream’s dividend. The CEO stated in the most recent earnings release that:

“Our management team and the board of directors unanimously support continuing the dividend at its current rate because we believe it is the best way to create value for our shareholders”

If giving away most of the company’s profits is the best way to create value then the outlook for the company itself must be pretty grim. In 2012 Windstream’s free cash flow was $676 million. With a share count of 585 million 86.5% of FCF was paid out in dividends. The share count has increased by 25% over the last two years and capital expenditures have more than doubled in the same time period. The company paid $625 million in interest in 2012, up nearly 19% since 2010. All of the signs point to trouble ahead.

A dividend yield of over 11% is extremely tempting, but a cut within the next few years is highly likely. Buying stocks for the yield can be dangerous, and Windstream is a prime example of that danger.

Date from Morningstar

The article Are These Lush Dividends In Danger? originally appeared on Fool.com and is written by Timothy Green.

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