Shares of Windstream Holdings, Inc. (NASDAQ:WIN) were plunging Thursday after the broadbrand provider reported disappointing earnings and eliminated its blockbuster dividend.
As of 1:26 p.m. EDT, the stock had lost 28%.
Like its peer Frontier Communications (NASDAQ:FTR), which also fell sharply on Thursday, Windstream is a popular dividend play, having offered a whopping 16% yield. However, Thursday's news changes that justification for buying the stock, eliminating the stock's key selling point for most investors.
In a press release, management said it would eliminate the dividend, effective immediately, and replace it with share buyback authorization of $90 million, as CEO Tony Thomas argued that the company's stock was undervalued.
In its second-quarter report, the company posted 10% revenue growth to $1.49 billion, which was slightly below the projected $1.5 billion. The company's bottom-line result flipped from a profit of a penny per share a year ago to a loss of $0.37 per share. However, that result beat estimates at a loss of $0.45 per share.
Windstream released the quarterly report first, and the market barely reacted to it. However, the stock plunged once the news about the dividend came out.
Shares of Windstream and its peers have plummeted as revenue and profits have fallen, and without a dividend payment a turnaround in the stock seems unlikely, especially with intense competition in the industry. While the 10% revenue growth may seem promising, the bottom line continues to erode.