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Windstream Holdings, Inc. Message Board

  • asteve2 asteve2 May 16, 2013 1:02 AM Flag

    IS the Dividend Safe?

    Lets Look at the latest cash flow statement since Win likes to point out that its free cash flow covers its dividend payout. Cash flows for latest period May 2013; add 000 to numbers below;
    cash from operations $304,600
    Subtract capital expenditures ( $243,500)
    equals free cash flow $61100
    minus dividend payout ( $148,100)
    equals dividend short fall of; ($87000)
    add the zeroes 000 and that 87000 becomes 87 million that the company does not have to pay its current dividend. Maybe the next quarter will be better.

    Sentiment: Hold

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    • It's safe for this year, but next year?????? I don't think they will be able to pay the current payout % next year. They will have no choice, they will have to cut the dividend.

    • parisonr May 29, 2013 7:13 PM Flag

      We know this dividend has been declared with and X-date and payout date in June. What's your question?

      Sentiment: Strong Buy

    • I think you have to exclude the changes in working capital, if you don't next qtr when they aren't paying deposits on insurance and items like that you'll think that the companies cash flow is great (like Q1-12 when they received $121K in cash tax refunds). What is troubling is this - if you take the cash flow down to just about the change in operating assets (working capital changes). The business generated 412.2M and the capex was 175.7M = 236.5 net. This quarter those numbers changed to 389.1M and the capex bumped up to 234.5M = 154.6 net. We have been assured the capex will decline in the 2nd half of the year but 18 month ago we were being assured it would reduce by the end of 2012. Time will tell

    • dself01 May 18, 2013 10:52 PM Flag

      I don't normally comment here but as this seems to be a serious attempt to discuss this stock and I'll bite.

      While I agree with the basic math above and if Windstream revenues don't rise or CAPEX does not decline then there would be a point where dividends would be a problem. The big issue is the current CAPEX expenditure of 243,500 last qtr.. If you look at the 10 year history of CAPEX expenditures for this company you see that CAPEX more than doubled starting in 2011.

      If you recall Windstream received some stimulus funds that require some match. From 2003-2010 the maximum annual CAPEX was 400 million per year which would be 100m per quarter. Starting in 2011 CAPEX soared to 700 million per year and was at 1.1 billion per year 2012. The stimulus projects are slated to start winding down this year and even if CAPEX just returns to 150 million a quarter 2010 level +50% increase then cash flow supports the dividend.

      I am long and doubled my position at $8 giving me an all in blended cost of $8.90 with the dividend announced and current share price I am ok. I do not hate the shorts as they are driving the price down so I can get more shares. If we go back to $8 I will double down again. I am not worried about the dividend, my investment horizon is 20+years and do not get hung up about unrealized profits or losses.

      Another way to look at it is the stock is so beat down that even if they did a 50% dividend cut then the $8.00 dollar price would still yield 6% so dropping below 8 for any long period would be unlikely unless they eliminated the dividend and we are not talking about a company that has no profits at all.

      I do not think the dividend will be cut but the shorts have driven this down so low much of the risk has been eliminated. My take the dividend is secure and strong buy.

      • 1 Reply to dself01
      • You said: even if CAPEX just returns to 150 million a quarter 2010 level +50% increase then cash flow supports the dividend.
        Exactly how much are you predicting capex expenses to be? 150 million a Quarter or 225 million a Quarter?
        You cannot expect capex expenses to return to 2010 levels as the present Win with all its recent aquisitions is a vastly bigger company today than it was in 2010. That being said would you like to restate your prediction for capital expenditures in the future?
        Greatly appreciate your input.

        Sentiment: Hold

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