3 Reasons to Buy Windstream

Like many in the telecom industry, Windstream (NASDAQ: WIN  ) has had to face a bumpy road thanks to the decline of the landline phone. But this is one business that’s not going to take change lying down. Windstream is doing its darnedest to gather assets that can help it adapt to a new era of cloud technology, and with a low stock price, this company could be a hidden gem waiting to shine. Here are three reasons to consider investing in this company.

1. This wind ain’t breaking
Growth is the name of the game for Windstream, whether in acquisitions or opening new offices. In 2012, it created two new data centers on top of its original 23, which focus on cloud computing and other tech-based services. This kind of database helps directly connect businesses with Windstream’s ever-evolving roster of products.

The company has also actively sought out strategic mergers since 2009, from Iowa Telecom to North Carolina’s Lexcom. However, its most recent expansion plan goes above and beyond even taking over a company. Windstream announced on March 12 that it would be providing its Ethernet services across the US. This move will offer Windstream’s most popular services (VoIP, cloud, etc.) to a broader audience, and could be a hugely effective way for the company to diversify itself on a larger scale.

2. Show me the money
To say Windstream’s revenue has blossomed over the past few years is an understatement. Since 2009, sales rose 65%. Even three years ago, the company was raking in the kind of dough -- $3.7 billion, to be exact -- that would be the envy of smaller telecom businesses. However, its margins have been smaller than expected: Operating margin was 14% in 2012, and net margin rang in at 2%. Which leads to the question, if Windstream’s revenue is so high, why are its stock price and margins so small?

There could be two possibilities at play here: margins are low as a result of the company pumping funds into its expansion project, which, if all goes according to plan, could eventually make Windstream even more profitable. Additionally, its low stock price may be a result of its…

3. Fat dividend
At an 11% yield, Windstream’s quarterly payout of $0.25 looks very appealing to ardent dividend investors. Its 89% payout ratio suggests that the company is throwing as much as it can into dividends, to lock in shareholder confidence.  

This behavior makes sense. Windstream has set some huge goals for itself in the near future. Without the continued morale of its investors, stretching its grasp across the country could become a momentously difficult task.

Best buy now?
A stock may be temptingly cheap and have a decadent dividend, but that doesn’t necessarily mean you should shout its praise from the rooftops. In Windstream’s case, the company has been making serious bucks, even as it works to further diversify its services. It looks like the business has the resources to put its money where its mouth is, and once the dust settles from adapting, Windstream could be a stock worth swooning over. 

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