Image source: Frontier Communications.

One of the most actively traded stocks to hit a fresh 52-week low last week was Frontier Communications (FTR), plunging 22.6% for the week after posting poorly received financial results. Analysts also grew even more concerned with the telco's pace of subscriber defections.

Frontier Communications has carved out a living by providing landlines and online connectivity to underserved rural markets, but it took a big step up earlier this year when it completed its deal to snap up Verizon's (VZ -0.53%) wireline operations in California, Texas, and Florida in a $10.54 billion transaction. Beyond just the 3.7 million landline accounts that Verizon commanded in those three states by the end of 2014, Frontier also picked up 2.2 million high-speed data customers, which included 1.6 million FiOS internet users and 1.2 million FiOS cable television accounts. 

Frontier may have fortified its base of customers for its fiber-optic and copper networks, but it's bleeding out. It closed out the third quarter shedding a decent chunk of both its legacy accounts and the Verizon customers that kicked in during the second quarter. 

The sequential dip is as significant as it is troublesome. The residential customer count has slipped from 5.228 million to 5.073 million over the past three months, with monthly churn increasing and average monthly revenue going the other way. The average money spent by its 516,000 business customers inched higher, but it also had 528,000 business customers on its rolls at the end of June. In just three months, we've seen broadband subscribers shrink from 4.503 million to 4.404 million and video customers slip from 1.618 million to 1.526 million. We can lay some of the blame here on the "cord-cutter" revolution, as millennials kiss their landlines and fat pay TV bills goodbye, but that's a notable contrast to the country's largest provider, which actually posted a sequential increase for the same quarter. 

Trying to make a connection

Shares of Frontier didn't just hit a 52-week low last week. When the shares hit $3.10 on Friday, it was the lowest that Frontier stock has been in more than four years -- and that's adjusted for Frontier's fat quarterly distributions. 

Frontier has been magnetic to speculative income investors, given its beefy payouts and low stock price. It's packing a nearly 13.5% yield now given last week's drop. Frontier's eyeing $920 million to $950 million in adjusted free cash flow for all of 2016, higher than what it was targeting three months earlier. However, its dividend won't be sustainable if customers keep cutting it loose. The company already had to shave its quarterly payouts in 2010 and 2012.

Citi analyst David Phipps sees the payout as secure in the near term. Under a bearish scenario with revenue slipping 4% next year, the dividend wouldn't be cut in half until 2019. In a more bullish scenario with revenue sliding 2.5%, the payout can hold up until 2022 until being cut in half.

Phipps' bearish scenario may seem optimistic at first. Consolidated revenue slipped 3.2% between the second and third quarters alone, so one can imagine what that would mean over the course of an entire year. However, it's also important to remember that Verizon's wireline operations were just handed over to Frontier. There will be some initial hesitation for those accounts. Frontier's legacy business experienced a mere 1.1% sequential dip in revenue. 

Frontier's big drop last week will be a dinner bell for risk-embracing dividend chasers. The stock's yield ballooned from 10.4% to 13.5% last week, with the shares slipping each and every trading day. We know Frontier's business will continue to erode, but that fat dividend will be hard to resist for investors embracing the reality of the situation.