FRONTIER COMMUNICATIONS CORP. $7.06 - Nasdaq symbol FTR

FRONTIER COMMUNICATIONS CORP. $7.06 (Nasdaq symbol FTR; Income Portfolio, Utilities sector; Shares outstanding: 1.0 billion; Market cap: $7.1 billion; Price-to-sales ratio: 1.5; Dividend yield: 5.7%; TSINetwork Rating: Average; www.frontier.com) recently paid $2.0 billion for AT&T’s traditional phone business in Connecticut. The company now has 3.0 million residential and business customers in 28 states.

Excluding acquisition-related costs, Frontier earned $47.7 million, or $0.05 a share, in the third quarter of 2014. That’s down 15.6% from $56.5 million, or $0.06 a share, a year earlier. Even with the AT&T operations, revenue fell 3.7%, to $1.14 billion from $1.19 billion, as lower telephone revenue offset higher sales of Internet services.

The company borrowed most of the cash it needed for this purchase, which increased its long-term debt to $9.2 billion, or 1.3 times its market cap.

However, the extra cash flow from the new operations should let Frontier maintain its $0.40-a-share dividend, which yields 5.7%. In the latest quarter, dividends accounted for 67% of its free cash flow (cash flow minus capital expenditures).

Frontier is still a hold.

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