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Windstream ( WIN) shareholders are having a rough year in 2012. Shares of the $6 billion phone company have slid more than 12% since the start of the year, making their underperformance versus the broad market more than twice than that. And it could be worse if WIN is forced to cut their dividend payouts in the next quarter or two.

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Windstream is a phone company that serves more than 3 million phone lines and 1.3 million internet subscribers. Even though the fixed-line business is a solid income generator, it's also capital intense. WIN's recent acquisition spree hasn't exactly helped ease the load on its balance sheet.

When investors talk about unsustainable dividends, Windstream's 9.7% yield should serve as a good example. Currently, the firm pays out a quarterly 25 cents per share (or a full dollar per year), even though the firm has only earned 30 cents per share in income over the last four quarters. That's not a new phenomenon -- WIN has been sporting a payout ratio higher than 100% for years.

With a balance sheet that's already leveraged and its cash position dwindling, the firm is going to need some sort of a capital break to keep things running. A dividend cut looks like the "least bad" way to do that.

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