Can Frontier Communications Maintain Its Healthy Dividend?

As investors, we want to earn the highest possible return possible. However, the uncertainty of today's environment really makes it difficult to forecast future returns. One way to make sure we earn our keep is to focus on dividends. That way, we get paid cash in quarterly installments and are not at the mercy of Mr. Market's mood swings.
Frontier Communications (NYSE: FTR) pays a juicy 9.6% dividend yield, which ensures multiple repeat appearances on dividend investors' radars. This raises the question: Is the dividend sustainable? Let's take a look at the company to make a more informed decision.

Making a splash
After paying a quarterly dividend of $0.25 for six years, Frontier cut its dividend to $0.1875 last September. This followed its acquisition of Verizon Communications' (NYSE: VZ) wire-line business in 14 states. As a result of this transaction, Frontier positioned itself as a force among rural telecommunications carriers in the United States.
Not surprisingly, this acquisition changed the landscape of the company. First, Frontier's shares outstanding went from 313 million shares to nearly a billion. Also, long-term debt rose to $8.3 billion immediately following the acquisition, from its previous level of $4.8 billion. After assessing the new combined entity, management decided that the lower payout was appropriate.... Read more