Cramer recommended rural telco company Windstream back in early June after Verizon Communications bought Alltel. He figured Windstream could snatch up the assets Verizon would be forced to sell in order to get the deal past anti-trust regulators. Well, since then WIN has dropped $4.40 a share, or about 32%.
Cramer likes Windstream’s 11% yield, but now he’s not sure the company will be able to continue the payout. WIN breaks one of Cramer’s cardinal rules in that yearly earnings aren’t double the dividend. Actually, WIN will earn just 2 cents more than the $1 it expects in EPS.
Add to this that the Federal Communications Commission is supposed to be ruling on two important initiatives that could further hurt Windstream’s business, one that would reduce the company’s charged rates and another that would take away subsidies. Cramer said that if these initiatives pass, then WIN could see its free cash flow cut by 26%.
So is this dividend safe? Is the 11% worth the risk, or should investors go with the more dependable Verizon and its 5.4% payout instead? Cramer brought Windstream CEO Jeff Gardner on Mad Money to find out. Watch the video to see what the chief executive had to say.
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