It's astounding how one minute you are looking at these dowdy old phone companies saying "Look, I will take the yield and accept that they can't grow quickly." And then after Windstream (WIN) gets a private letter ruling from the IRS to issue a tax-free spinoff of its copper and fiber lines, you have a growth stock with a pretty decent dividend.
On the one hand, it's almost as if it is alchemy. Windstream spins off its physical assets and gets to reduce its heavy debt load while becoming a pretty interesting slow-growing service company simply because the IRS blesses what we thought couldn't be blessed.
It's almost unfairly good.
On the other hand, we can't be unhappy with the price appreciation. It's not asterisked.
Of course, all phone companies will now do this; it is almost reckless not to do it.
This weekend at a speech for a relatively older crowd, I suggested that Verizon (VZ) would be a perfect retirement vehicle, with its 4% yield and slow growth.
Little did I know that it could also be a growth vehicle with a very fast wireless division that is no longer held back by giant physical plant costs and the need for depreciation charges that depress earnings.
As I always like to say, it is better to be lucky than good!
Oh, and while we are at it, don't forget that David Faber suggests that the cable companies would be a natural for this, and my writing colleague and all around life advisor Matt Horween suggests that the utilities could be in line to do spin-offs, too.
It's funny: The IRS thinks it has no right to rule on inversions, but with a stroke of a pen, it creates instant value for those who own these dowdy old stocks without any help from congress whatsoever.
What a windfall.