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Carla Pasternak's Premiere Issue of High-Yield International Just Released
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Shares of Windstream (WIN) Provide Stable Income for Conservative Investors

By Carla Pasternak
Editor, High-Yield Investing
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View our subscription options for High-Yield Investing here.

Published:  October 18, 2007

Windstream (NYSE: WIN, $13.95) debuted in July 2006 when wireless service provider Alltel (NYSE: AT) spun off its traditional phone-line business and combined those assets with privately owned Valor Communications.

A member of the prestigious S&P 500 Index, Windstream is currently the largest telecommunications company in the United States focused on rural customers. The firm operates in 16 states, focusing mainly on deep southern states such as Alabama and Georgia, but also operates as far west as New Mexico and as far north as New York.

The company provides a variety of telecom services, including local, long-distance, and broadband high-speed Internet. Revenues in 2007 are expected to be north of $3 billion.
 

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For the past four quarters, WIN has paid a steady dividend of $0.25 per share, providing shareholders with a yield of 7.2%. With total annual payouts of approximately $477 million and free cash flow of nearly $718 million, the company pays out about 67% of free cash flow. As such, we consider the dividend highly sustainable over the long-term.

WIN focuses on rural markets where competition for telephone customers from cable companies and other telecoms is far less intense than in the big cities. Rural phone companies are traditionally cash cows with strong operating margins -- and WIN is no exception.

The company is projected to earn $0.90 a share in 2007 -- a total forecast to grow slightly to $0.94 in 2008. With highly predictable earnings and dividend payouts, WIN's share price typically fluctuates in a narrow range. Over the past 12 months, the stock has hovered between $12.46 and $15.63.

Potential risks include competition from cable and wireless providers. When urban areas are saturated, cable companies are likely to push harder into rural areas to gain telephone customers. At the same time, wireless service has and will continue to reduce the demand for fixed or land lines. Already, the company is losing nearly 5% of these phone customers yearly, although so far those losses have been replaced with increased Internet revenues.

Furthermore, the company has a relatively solid balance sheet, which should enable it to continue gaining market share through acquisitions. And Windstream has done just that, as shown by the recent purchase of CT Communications -- an all-cash deal valued at $585 million that will hand the company another 30,000 broadband Internet subscribers. Future acquisitions should help offset declines in the traditional phone line business, enabling WIN to maintain its generous dividend payments.

Action To Take ---> WIN is an appropriate stock for those investors who seek a stable income stream, but are not necessarily hunting for capital gains. If you are one of them, then WIN should be a winner.



Carla Pasternak
Editor
High-Yield Investing
http://www.StreetAuthority.com

To receive in-depth guidance on today's leading income investing opportunities each month, plus access to several model portfolios, please subscribe to Carla Pasternak's premium newsletter -- High-Yield Investing.

Carla Pasternak draws on a variety of financial backgrounds to make profitable calls on income-generating stocks for her readers.

Carla has been employed in the investment industry for more than two decades. In addition to her work as a writer for several other nationally recognized financial publishers, her previous experience includes a position as President of a well-respected investor relations firm. She has also been writing shareholder reports for public companies (annual reports, speeches, corporate profiles, slide shows, etc.) since 1980.

A highly successful investment analyst, Carla specializes in high-yield, income-paying stocks. In that pursuit, she's always mindful to select companies that not only pay rich dividends, but that also have the potential to deliver strong long-term capital gains.

On the educational front, Carla holds both MBA and Ph.D. degrees. When she's not watching the market, she's teaching business courses at the college level and managing several million dollars in portfolio assets.


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