StockCall Scrutiny on Frontier Communications and CenturyLink: Are These High Dividends Sustainable?

Tue Jan 22, 2013 8:05am EST

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StockCall Scrutiny on Frontier Communications and CenturyLink: Are These High Dividends
Sustainable?

LONDON, January 22, 2013 /PRNewswire/ --

    The domestic telecommunication sector is regaining its vitality. While the global
players are looking to consolidate their positions, smaller domestic players are
expected to benefit from increased M&A and other collaboration activities. StockCall
professionals have completed fully detailed technical analysis on Frontier
Communications Corp. (NASDAQ : FTR) and (NYSE : CTL). These reports can be downloaded
for free at  

    http://www.stockcall.com/report  

    Sprint Nextel Corp.'s interest in Clearwire has brought the spotlight on smaller
telecom players. The competition got more intense when Dish Network Corp. decided to up
the ante for Clearwire with a higher bid. While the domestic telecommunication sector
deals with problems like paucity of funds for innovation and lack of economies of scale,
the new undertakings in the sector bode well for the companies involved.  

    Frontier Telecommunications is going ahead with new product and services offerings.
While Frontier mainly caters to the rural market in the country, it is expected to
benefit from improving macro-economic scenarios. Frontier also recently collaborated
with TRG Customer Solutions. Under this new collaboration, the company will provide
enhanced security and back-up services. Frontier plans to target its corporate clients
with these new products and the new offerings will likely help the telecommunication
company in boosting its margins. Full technical analysis on Frontier Telecommunications
can be accessed by signing up for free at  

    http://www.StockCall.com/FTR012213.pdf  

    Apart from operational improvements, Frontier has been good with its investors as
well. Though, the stock grew rather dull, 6 percent last year, the company made up for
it by offering a delectable 10% dividend yield. While the company had to resort to
slashing its dividend last year, the stock is still an interesting pick for dividend
investors. Frontier also needs to brace itself for a fundamental shift in its business
area as more and more of its customer base is now moving towards wireless services.
Frontier stock is currently trading at Price Earnings ratio of 29.87, making it a better
buy than its peers like CenturyLink Inc. [Free Technical Analysis Report on CTL 
[http://www.stockcall.com/CenturyLinkInc012213.pdf ]](1) which trades at P/E ratio of
38.11.  

    CenturyLink, another major domestic communication player is also putting premium on
innovation. The company recently announced the construction of its new Technology Center
of Excellence. While the new construction points towards growth in the future, the
company has not been very successful in converting the growth into higher bottom-line
figures. CenturyLink made a couple of high-profile acquisitions in the past including
the purchase of Qwest. Though, the acquisitions helped it to solidify its customer base,
they did not lead to corresponding improvement in margins and profits. Its competitor
Frontier Telecommunications, on the other hand, merged its purchase of Verizon rural
accounts into its business, ahead of the schedule. Frontier is expected to show the
positive impact of the acquisition in the coming quarters.  

    However, CenturyLink is looking to increase its hold in the data transmission area.
Its acquisition of Savvis is likely to help it grow in the said sub-sector. CenturyLink
stock offered a mild 8.5% last year, though it was supplemented by a 7%+ dividend yield
ratio. However, one needs to keep in mind that the company is devoting a big chunk of
its free cash flows to serve its high-dividend payments. This figure casts a shadow of
doubt over the long-term viability of its dividends. So while the stock may be
considered for a short-term purchase, investors are warned to remain cautious about the
long-term outlook for the company.  

    Footer:  

        
        1) CenturyLink Inc. Technical Analysis [
          http://www.StockCall.com/CenturyLinkInc012213.pdf ]


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