Source: Frontier.

When regional telecom operator Frontier Communications (NASDAQ:FTR) reported second-quarter results on Tuesday night, the stock had gained more than 4% that day. Investors may have been getting excited about Frontier's selling high-tech Nest thermostats via its Frontier Secure digital products store.

But those excited investors calmed down quickly when the earnings report landed, merely meeting analyst expectations. On Wednesday, Frontier shares more than erased Tuesday's gain by falling 6%.

In a slightly longer view, of course, Frontier investors have little to complain about. As of Friday night, Frontier had gained 37% year to date and 41% over the past 52 weeks. In both cases, it's a straight-up duel with fellow regional provider Windstream (OTC:WINMQ), as these stocks have soared far ahead of other telecoms.

So Frontier reported sales of $1.15 billion in the second quarter, down 4% from year-ago levels and slightly below analyst targets. The company lost 32,000 residential accounts and 2,000 business customers during the quarter, but it made up for these losses with higher average revenues per consumer account. That follows from 28,000 new broadband subscribers, who nudged the average bill size upward.

On the bottom line, non-GAAP earnings held flat year over year at $0.05 per diluted share. Here, the consensus analyst targets turned out to be correct.

CEO Maggie Wilderotter. Source: Frontier.

Looking ahead, Frontier held its full-year guidance figures steady despite the slight revenue shortfall. The company is preparing to spend $2 billion to acquire 1.5 million AT&T wireline accounts in Connecticut. This deal is expected to close in the fourth quarter, and costs related to the Connecticut agreement reduced Frontier's earnings by $0.01 per share in the second quarter.

In a prepared statement, Frontier CEO Maggie Wilderotter highlighted a streak of six consecutive quarters with strong broadband services growth. Overall, this report supported Frontier's "long-term objectives of revenue growth, delivering strong free cash flow and maintaining a very attractive dividend payout ratio."

Frontier's trailing cash payout ratio is indeed among the lowest in the telecom industry at 47%. Fellow high-flyer Windstream, for example, uses a massive 79% of its free cash flows to finance dividend checks.

To put these numbers in context, Frontier already offers a generous 6.3% dividend yield today, but Windstream's large dividend expenses power an even juicier 8.9% annual yield. If Frontier raised its cash payout ratio to Windstream's levels, and if we can assume that share prices wouldn't be affected by such a move, Frontier's yield would jump to 10.6%.

That's not likely to happen. Like many smaller American telecoms, Frontier has actually decreased its annual dividend payouts twice over the past five years as landline voice customers keep taking their cash-generating business to wireless services.

FTR Cash Dividend Payout Ratio (TTM) Chart

FTR Cash Dividend Payout Ratio (TTM) data by YCharts

Wilderotter has seen sky-high payout ratios up close and personal, didn't like them at all, and took painful steps to relieve the dividend cash crunch. Expect her to defend today's low payout ratios, even if it means slashing the quarterly check sizes again.