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In the past, there was no concept of cell phones and dial-up modems, and landlines were considered to be a technological breakthrough. On the other hand, there were many issues associated with these advancements, like poor connections, slow speeds, and expensive connectivity products. But with the passage of time, the telecom industry has grown aggressively, and today it provides high-quality services at low prices.

Indeed, fiber optics have replaced traditional landline services by providing reliable and enhanced quality. In particular, industry pioneer Windstream (WIN) also uses fiber optics to provide the highest quality possible in broadband, video and voice services. It also provides telephone services, multi-site networking, and high-speed networking at the corporate and individual level. In this article, I examine whether Windstream's monster dividend is safe in the face of new technological threats.

Windstream is one of the first companies to invest heavily in implementing cloud computing services to provide limitless communication connections and to store data wirelessly. Along with some other fiber optic advances, cloud computing will help Windstream compete against its telecom competitors AT&T (T), Verizon (VZ), and Sprint-Nextel (S), which are also trying to enter the cloud computing services industry. In 2010, the company acquired Q-Comm for $783 million, along with Kentucky Data Link and Norlight subsidiaries. Cloud computing will help it to gain success in the future by dropping all the unused landlines and use a wireless data hosting capability, which is going to be an essential commodity in the near future. Windstream may have been beaten to the punch for now. CenturyLink (CTL), Windstream's competitor, acquired Savvis to provide IT solutions and cloud infrastructure globally. Windstream, with its new hardware, is setting up for increased competition with CenturyLink. John Leach, Windstream's Executive Vice President of Business Sales, has announced an acquisition of $2.3 billion of PAETEC. The acquisition will help it to expand its fiber optic network by boosting capacity through PAETEC's fiber network resources to become a nationwide network.

Windstream trades at around $12, with a forward earnings multiple around 15. Windstream shares have some catching up to do, but the company has positive estimates due to technology trends like cloud computing and MPLS networking. Its price-to-earnings ratio is modest with potential growth from both areas, and cash flows are sufficient to support its dividend yield of 8.50%. The company has total cash and debt of $227 million and $9.27 billion, respectively. The book value per share is $2.56, and the company has a market capitalization of $6.86 billion.

Companies like Sprint, AT&T and Verizon are losing customers due to consumers' drastic reduction in landline usage. On more recent reason for their loss is that consumers are using cloud computing without implementing it in a way to have substantial growth like CenturyLink and Windstream.

New trends for 2012 suggest that cloud computing services will be required to build up cost-friendly platforms and SIP trunking. In my opinion, most of the upcoming innovations will include touch computing, social gestures, spatial gestures, efficient use of voice control devices, and flexible screens. These technologies will benefit bandwidth providers like Windstream.

Windstream announced its latest version of a high-speed internet and entertainment service in early March. This new product, called Merge, will give subscribers access to all gaming and social network feeds on their home television screens. This service will also give unlimited nationwide calling and U.S.-based customer support to its customers and subscribers. It has announced many broadband stimulus projects in states funded by the American Recovery and Reinvestment Act of 2009.

The new releases have yet to make a positive impact on the company's stock price in 2012. Nonetheless, the company has a culture that is focused on the creation of sustainable revenue streams. Cloud computing, broadband, and entertainment services are guiding Windstream to make capital expenditures wisely. Windstream has also shown improvement in its household services in certain states. The company has a tradition of caring about the communities that it services.

Indeed, rural areas throughout the U.S. have a finite customer base, and revenue made by broadband and internet services, where competition is not tough, is sustainable. Considering the company's latest investments, Windstream will overtake its competitors on an operational basis. I am confident the recent acquisitions and branded entertainment services will enhance the value of this company for the long term, and allow shareholders to continue collecting dividends.

Source: Is Windstream's Monster Dividend Safe Now?