Shareholders of rural telecom Frontier Communications
Oh well. You can't have it all, right?
Sales sank 4.8% year-over-year to $1.26 billion, just ahead of Wall Street's $1.25 billion revenue target. Adjusted earnings rose 33% to $0.08 per share, again ahead of analysts who expected flat income year-over-year.
And the fun didn't stop there: Free cash flow jumped 18% to $285 million, which is more than enough to cover the roughly $200 million Frontier spends on dividends every quarter. Capital expenses did indeed slow down in the second quarter as unseasonably warm weather moved some of the planned infrastructure work ahead of schedule. That points to continued strong cash flows in the back half of the year.
Looking below the financial numbers, customer churn is falling as Frontier rolls out more flexible pricing plans. Phone line customers are signing off in droves, but that exodus is balanced by rising numbers of broadband and TV service customers.
So the good news overwhelmingly outweighs the bad this time. Frontier's dividends look a lot safer today than they did last night. The price jump reduced Frontier's dividend yield from 11% to 9% in one fell swoop, but wouldn't you rather own a stable single-digit dividend than a risky double-digit phenom that could be gone tomorrow?
For a recent example of collapsing mega-payouts, look no further than global telecom giant Telefonica
Frontier is such a tempting income stock that our top analysts have started in-depth coverage of the stock. Click here to get access to our brand-new premium report on Frontier, bundled with a full year of analysis and updates as the telecom moves into a brave new broadband world.
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