These are challenging times for regional telcos, and Frontier Communications (NASDAQ:FTR) and CenturyLink (NYSE:CTL) investors know the pain. CenturyLink has seen its stock slide 19% this year, and that's child's play compared to the 74% plunge at Frontier once we adjust for a brutal 1-for-15 reverse split.

Chunky payouts have been the dinner bell for investors buying into companies losing landline customers while struggling to keep up with larger players vying for slices in the thinning pies of pay TV and to online connectivity. Yields of 20% for Frontier Communications and 11.7% for CenturyLink are tempting, but they're not much of a consolation prize when the stock declines are more than offsetting those quarterly distributions.

Someone holding a Frontier hardhat.

Image source: Frontier Communications.

Calling collect

Income investors buying Frontier and CenturyLink as yield plays have to know that hefty dividends aren't sustainable as fundamentals crumble. Frontier has slashed its dividend rate several times over the past few years, and there's little reason to believe that the trend won't continue. It has posted 10 consecutive quarterly deficits, and analysts don't see an end to the red ink anytime soon.

CenturyLink has fared better. It hasn't cut its payout rate since early 2013, but one has to wonder if that streak will end as it continues to earn less than its distributions. You have to go back to 2010 to find the last time that CenturyLink's payout ratio was south of 100%, but at least it has a payout ratio since it's still profitable.  

Neither company is standing still. Frontier Communications and CenturyLink have turned to acquisitions to make up for their organic shortfalls. Frontier shelled out $10.54 billion for Verizon's wireline operations in California, Texas, and Florida. CenturyLink is expected to close on its $34 billion merger with Level 3 once antitrust regulators sign off on the deal later this year. 

Things may seem bleak, particularly for Frontier, but this isn't necessarily a slow swirl down the drain. Frontier is hoping to achieve $1.6 billion in annualized cost synergies by the middle of next year. CenturyLink has seen its revenue decline every year since peaking in 2012, but the combination with Level 3 should provide new opportunities to cash in as well as several ways to shave costs. 

There's no denying that Frontier is the riskier stock here, and that was true even before it shed nearly three-quarters of its value in 2017. CenturyLink has the better chance for success, though risk-tolerant investors wouldn't be wrong in assessing that Frontier has the bigger upside if it's able to turn things around.

CenturyLink would still have to get the nod here as the better buy for anything other than speculative gamblers. Neither dividend is safe, but there's no reason to believe that CenturyLink won't be around and commanding a better-than-average, though likely reduced, yield in a few years. There are risky opportunities in this niche. Tread carefully.

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool has a disclosure policy.