Frontier Communications Corp (NASDAQ:FTR) unable to cross profitability frontier
Frontier Communications Corp (NASDAQ:FTR) is a conventional wire-line telecommunications company that serves large sections of rural areas in the United States. When investors scan S&P 500 companies seeking yield, this company will invariable do a jack-in-the-box. This is particularly true in light of the fact that dividends receive all special tax benefits and the interest rates have been rock-bottom on supposedly safer investments such as US Treasury Obligations and bank CD’s.
Gain some, lose some
FTR’s dividends were its strong point and over the last 4 years that has been chopped two times. It also managed to drag the share price along with it. The first pre-announced cut occurred in the latter half of 2012 and the price was cut from $1.00 to $0.75. Simultaneously, the company also announced that it had acquired a sizeable segment of Verizon’s rural business. FTR informed its investors that the dividend that would follow the merger would be cut down.
What the market perceives
The 2nd dividend cut came as a surprise to most investors. This especially since the management as well as the board had vociferously declared that the dividend will be sustainable. Today the one question that many investors are asking is whether the dividend is safe. At the beginning of 2013, there had been similar concerns in the market which drove the share price to a low of $3.71 and raised the yield to double-digits.
Market not impressed
The company released its Q1 earnings report on 6 May and even then the market maintained its stoic demeanor. The share price continued to battle with the lows that it was at. The last week of June, the share price was just touched $3.80. However, the short interest continued to be at escalated levels. This was a distinct sign that it would tale almost 5 weeks to recover.