Are Earnings or Dividends the Attraction at Frontier Communications?


24/7 Wall St.

Telecom provider Frontier Communications Corp. (NASDAQ: FTR) posted better-than-expected EPS after markets closed last night, reporting adjusted EPS of $0.08 compared with the consensus estimate of $0.05. Revenue of $1.26 billion was nearly -5% below expectations.

Shares are up sharply today following the report, and the question is whether the company’s earnings or its 10.8% dividend yield is driving the rise. The adjusted EPS knocks out charges of -$0.06/share, most of which was attributed to a $70.8 million payment for early repayment of debt. Frontier’s annual dividend payment is $0.40/share. That’s a drop of -60% from the annual dividend of $1/share just two years ago.

Frontier lost residential and business wireline customers in the quarter, but picked up 5,400 broadband customers and a net 6,300 video customers. The company still expects free cash flow of $900 million to $1 billion in the full 2012 fiscal year, which is…

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