Morningstar Rating

Stock Research and Analysis

by Michael Hodel, CFA

Bulls Say

Despite dividend cuts in 2010 and 2012, Frontier shares still offer a very attractive yield. The new payout is also far more sustainable, totaling less than half of cash flow in 2013. In fact, the firm has already started to grow the dividend again, recently announcing a 5% increase.
Frontier's operations are often in small markets and rural areas where competition is less severe and government subsidies pad margins.
The latest Verizon transaction will add high-quality assets and allow management to put its extensive integration expertise to use. Read more 

Bears Say

Frontier faces tough choices as the core phone business erodes. The firm needs to invest heavily in its networks to keep pace with rivals while meeting shareholder expectations for yield and managing the balance sheet.
Frontier took on a huge burden with the 2010 Verizon asset purchase. Verizon neglected these territories over the years, eroding customer loyalty.
Given the dispersed nature of many of Frontier's territories, deploying the latest technologies may not be economical for several years, if at all. These areas could make prime targets for wireless data services. Read more 

Management

Leonard Tow took control of Frontier in 1989 and shaped it into a telecom firm, buying assets and selling off utility operations. Tow resigned as CEO in 2004 and later surrendered the chairman title. Maggie Wilderotter, who had spent two years as a   Read more 

Profile

Frontier Communications provides phone, Internet, and other data transport services to 3 million residential and about 300,000 business customers in 28 states. Frontier   Read more 

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