Windstream or Frontier: What's the Better Buy in 2013?

In the following video, Fool analyst Andrew Tonner takes a look at two of the most popular telecom stocks in the Fool universe: Windstream (Nasdaq:WIN) and Frontier Communications (Nasdaq:FTR). Which is the better buy in 2013?

With both of these stocks, the dividend is a crucial part of the equation, Andrew says. Frontier pays an impressive 8.6% dividend, but when you dig deeper it starts to get slightly alarming. A major problem for Frontier is the decline in rural telecom. That's resulted in dividend decreases over the past two years.

The company is not terribly leveraged, but investors should see the decrease as a red flag, Andrew says.

Windstream pays out an even higher dividend at 11%, and unlike Frontier, it has actually generated positive revenue growth. It has paid the same quarterly dividend since December 2006. But it also comes with risk, in the form of a high payout-to-cash-flow ratio that should make investors question the sustainability.

Windstream aside, you won't find many higher dividends than Frontier's. While its juicy dividend is tempting, every Frontier investor has to understand that it's not a sure thing. A huge acquisition has transformed the company forever. Will the move bear fruit, or are investors destined for another disappointing dividend cut? In this premium research report on Frontier Communications, we walk you through all of the key opportunities and threats facing the company. Better yet, you'll receive a full year of updates to boot. Click here to learn more.


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