WIN Stock Has Sails
Fiscal 2016 has been an excellent year for Windstream Holdings, Inc. (NASDAQ:WIN) stock investors, with year-to-date returns of 53%—a far cry from the 47% loss experienced in 2015. So, what is different this year for Windstream stock? Is management doing a better job at moving key metrics?
The answer is yes, but that does not fully explain the driving force behind the stock’s share performance.
With global government bond yields approaching zero, investors are reaching for yield, creating a tailwind that is pushing indexes to new highs and sending dividend stocks soaring. Luckily for investors, Windstream stock has the necessary sails to catch these tailwinds.
Record-High Index Values
U.S. equity markets and bond prices are forging ahead, making new all-time highs on nearly a daily basis. The pandemonium caused by the Brexit vote is now just an asterisk in the history books, as investors completely shrugged off the possible global economic implications. Global governments assured us further quantitative easing programs would be used as needed and that was enough to stem the prospect of any economic fallout.
New all-time highs on the indexes are significant. It suggests that higher prices will prevail because no overhead price resistance exists. Investors holding an index position are now in the black and are less reluctant to sell. Without sellers, there is no supply, thus the path of least resistance is toward higher prices.
Year-to-date, WIN stock is up 53%, while the telecommunications sub-index is up 8.3%. WIN stock is exhibiting exceptional levels of relative strength. Add the additional upside created by record-high index prices and 2016 could indeed be a stellar year for investors in Windstream Holdings, a provider of communication and technology solutions to residential, small business, and enterprise consumers.
High Dividend Yield
Windstream currently pays out a dividend of $0.15 per share per quarter. Based on the current share price, WIN stock’s dividend yield sits at 6.32%. This is a high dividend yield.
The Windstream dividend will remain attractive as long as the company can continue to grow that dividend and alleviate any concern regarding payment.
Examining the financials, I came across management’s plans to optimize the company’s balance sheet. WIN stock’s management team issued $600 million in secured loans to refinance high-cost debt. It also retired $270 million in high coupon unsecured debt. The end result is an improvement of the debt maturity profile. The company is also expected to generate $100 million in free cash flow for 2016. Needless to say, my concern regarding the WIN stock dividend and the company’s ability to pay it has diminished.
Dividend-paying companies are seeing growth-style share performance as investors reach for yield. Government bond yields are offering little in comparison as the trend toward lower yields continues. In mid-January, WIN stock yielded upwards of 10%; investor demand has since pushed up prices and lowered the yield. This is the tailwind a high dividend provides.
Bullish WIN Stock Chart
While Windstream investors are enjoying a stellar year in terms of price performance, the good news is that the current price chart paints a bullish picture and points to further gains.
Chart courtesy of www.StockCharts.com
In mid-March, WIN stock produced a golden cross on the chart. A golden cross pattern is a bullish signal that is produced when a faster moving average (50-day moving average) crosses above a slower moving average (200-day moving average). Traders use this signal to confirm a bull market is on the horizon.
Currently, WIN stock has been consolidating for the better part of two months in what can be best described as either a pennant or cup-and-handle formation. Either way, the pattern is alluding to a midpoint consolidation. The price objective of this pattern sits at $11.75.
The Bottom Line on WIN Stock
WIN stock is sitting pretty in an environment that is ripe for price appreciation, offering a high dividend yield in a market that is reaching for yield. The equity markets are trading at record highs and WIN stock is set to perform well. As long as the wind keeps blowing, 2016 price appreciation is set to continue for Windstream stock.