Based on the aggregated intelligence of 125,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, telecom company Frontier Communications (NYSE:FTR) has earned a respected four-star ranking. While five-star stocks have been the best performers, our data has shown that four-star stocks still outshine the market by a significant margin and shouldn't be taken lightly; conversely, low-rated stocks have woefully lagged the market average.

With that in mind, let's take a closer look at Frontier's business, and see what CAPS investors are saying about the stock right now.

Frontier facts

Headquarters (founded)

Stamford, Connecticut (1927)

Market Cap

$2.62 billion


Integrated Telecommunication Services

TTM Revenue

$2.27 billion

Return on Equity (average, last three years)


Dividend Yield, trailing



Verizon Communications (NYSE:VZ)

CAPS members bullish on FTR also bullish on

General Electric (NYSE:GE)
Bank of America (NYSE:BAC)

CAPS members bearish on FTR also bearish on

Pfizer (NYSE:PFE)
Ford Motor (NYSE:F)

Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, fully 449 of the 483 members who have rated Frontier -- some 93% -- believe the stock will outperform the S&P 500 going forward. These bulls include perezosa and wolfhounds.

Late last month, perezosa noted that Frontier "is doing well in the area they serve. They cater to rural and residential customers who need entertainment in these tight budget times. Good price, good dividend."

In an earlier pitch from November, wolfhounds elaborates on Frontier's healthy fundamentals and bargain-like price (which is basically unchanged since):

Cash flow, cash flow, cash flow. ... The payout ratio this year is 63% of FCF, but will decline in coming years because of the just completed buyback of 17.1m shares for $200m. The company has also raised 2009 cash flow numbers which they will probably use to start buying back debt at a discount.

The strategy put into place by management several years ago to add high value services to offset land line losses is responsible to improved fundamentals. ROE now stands at 25%, and net margins at 9.1%. The stock trades at a trailing P/E of 14... And with the increasing cash flow, the $1 [dividend] is very safe.

What do you think about Frontier, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 120,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.

Beginning Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Foolish contributor Brian Pacampara owns no position in any of the companies mentioned. Bank of America and Pfizer are Motley Fool Income Investor selections. Pfizer is also an Inside Value pick, and the Fool owns shares of it. The Fool's disclosure policy always gets a perfect score.