When Frontier (FTR) announced fourth-quarter results it also reduced the yearly dividend from $0.75 to $0.40. We noted in a previous article that the dividend cut, while painful to many, was necessary. The cut added flexibility to:
- Meet pension obligations
- Reduce and/or refinance debt
- Lower leverage
- Lower payout ratio (42% at midpoint of 2012 FCF guidance)
The stock was trading at $4.52 and at the time yielding 8.8%. Currently the stock is trading around $3.20, pushing the yield up to 12.5%. The high yield represents the market’s fear the dividend may not be sustainable. We’ll take a look at some metrics and recent events in an effort to determine if a dividend cut is in the cards.
Below is FCF (free cash flow) guidance at the end of the March quarter, provided by management. …Click here to continue reading the full article at SA…