Investment in Windstream Corporation (WIN) Appears to Be a No-Brainer

Frontier Communications Corp (NASDAQ:FTR) has been hampered by declining revenues and cut its dividend last year. I believe lack of investment has played a role in Frontier’s problems recently. If debt is used to strengthen or build out areas that are seeing growth then it makes sense, Frontier Communications Corp (NASDAQ:FTR) looks like it has been too risk-averse. I do not see Frontier Communications Corp (NASDAQ:FTR) making any movement one way or the other for the next few quarters.

Even a cut of dividend will not hurt too much

When Frontier cut their dividend the company’s saw their stock take a dip of roughly 15%. CenturyLink, Inc. (NYSE:CTL) has bounced back a little but is still trading at almost $36 per share while it was trading at almost $42 before the cut. Frontier continues to trade at roughly 15% less than its price before the dividend cut.

One interesting aspect of CenturyLink, Inc. (NYSE:CTL)’s dividend cut was its apparent effect on Windstream Corporation (NASDAQ:WIN)’s stock price. The latter saw its stock dip roughly 15% as well as the former at the same time. This is strong evidence that a dividend cut is already priced into Windstream’s stock price. While the stock would probably take another dip, of around 5% or so, if a dividend cut is announced I think the risk is worth it to hold on or even to buy Windstream.

I do not think Windstream will be cutting the dividend anytime in the near future. 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 Corporation (NASDAQ:WIN) investor.

The article Investment in Windstream Appears to Be a No-Brainer originally appeared on Fool.com and is written by William Alder.

William Alder has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. William is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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