Frontier Communications - Is the Dividend Safe?

Frontier Communications (NYSE: FTR) was founded in 1935 as Citizens Utilities and became a pure-play telecom network operator in 2004. Frontier announced a deal with Verizon Communications (VZ) in May 2009. Frontier acquired approximately 4.8 million access lines from Verizon, tripling the size of the company. The Verizon properties were packaged into an entity called SpinCo and merged with FTR. The all-stock transaction was valued at approximately $8.6 billion and closed July 1, 2010. The transaction created the nation’s fifth largest incumbent local exchange carrier (ILEC) operating in 27 states. The dividend was cut from $1.00 to $0.75 upon closing. The yield is 9% based on the February 24, 2011 closing price. So is the dividend safe? We’ll look at what management envisioned when they announced the SpinCo acquisition and where they are today. Then we’ll discuss how this relates to the dividend going forward. When Frontier announced the acquisition... Read more

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