Frontier Communications: Are Dividend Cuts A Thing Of The Past?


Frontier Communications beat both revenue and earnings estimates but the question on most investors mind is the high dividend yield safe or a red flag? The stock closed at $3.92 and at the time of this writing yielding 10.8%. The high yield represents the market’s fear the dividend may not be sustainable. To answer the above question we need to take a closer look at the FCF (free cash flow) numbers.

Frontier Communications is reporting FCF of $285 million in the snapshot shown above. The dividend payout was about $100 million which converts to a FCF payout ratio of 35% as reported by FTR. Sounds like a very safe ratio but it is important to note it is accompanied by note 5 which states:

FCF as defined by Frontier, and excluding acquisition and integration costs and capex.

The traditional measure of FCF is defines as cash from operations minus capex which produces a different picture as opposed to management’s definition. Here is how management calculates FCF:
…Click here to read the full article at SA…

 

Advertisements

About IIEX

Click "About" in the menu at the top for more information about the author. We also have a page at "Seeking Alpha" ( http://seekingalpha.com/author/david-klein ). Please Click on and read the "Disclaimer" in the menu at the top. Have a question? Contact us at iiex@live.com.
This entry was posted in FTR, Stocks and tagged , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s