Frontier Communications Corporation (NASDAQ:FTR) has been a stock that I have been following for a while. Now, for a long time, I had worries over the company’s dividend, and sure enough, it had been cut over time. Well, I am here to tell you that following the crash in shares as a result of the unsustainable loss of customers, it is my fear that earnings and cash flows will no longer be able to cover the hefty dividend. Given the massive sell-off in shares, the stock is yielding almost 16%. That is attractive to so many income investors who realize that in just a few years, their entire investment can be recouped via dividends. There is truth to this statement, but it relies on two things. First, a stable dividend, and second, still being in business.
Following my coverage of the implosion I have heard chatter that the name is going to go out of business. There is no justification for this statement. Things are in rough shape, no doubt. But that is simply “fake news.” Despite the pain of customer losses which I will discuss, there are still sizable revenue streams and millions of customers. The only way it goes ‘out of business’ is through a buyout. At least in the foreseeable future. So disregard anyone who says this. To the other point, since the last cut to the dividend it has managed to keep the payouts going. Some claim it’s unsustainable, but my prior work had shown nothing to indicate a truly imminent cut. Frontier had delivered. However, we must be true to the data. The data suggests a cut is now…………………READ MORE