Frontier Communications Corp. (fka FTRCQ)

[Gaintrader]

Your not alone with concerns over FTR's dividend;

Frontier Could Cut Dividend in 2018 -- Barron's BlogFont size: A | A | A
3:47 PM ET 9/16/16 | Dow Jones

By Amey Stone

Michael Rollins of Citi Research now predicts that Frontier Communications (FTR), a dividend favorite with a 10% yield, will have to cut its payout in 2018.

That's still a ways off, but the problem will get more attention from investors, he believes.

Rising debt levels are the culprit, even though Frontier has enough free cash flow (FCF) to sustain the dividend.

Rollins writes:

Our focus on Frontier's financial outlook and the timing of dividend risk was largely based on the payout of FCF. However, we believe investors will increasingly focus on Frontier's gross leverage ratios given that "maintenance" covenants on some of its outstanding debt are set at 4.5x and could limit the company's financial flexibility.

Maintaining current dividend payments would push gross debt leverage to 4.6x by the end of 2018 using our forecasts. We see Frontier breaching the financial leverage test of 4.5x as a yellow flag and a possible wake-up call that the current direction of cash flow and leverage are unsustainable to support the current dividend.

Rollins recommends investors sell their Frontier stock. He has a $3 price target. Frontier fell 2.5% Friday to $4.25. The shares are down about 9% this year. Frontier traded as high as $5.80 in March.

More at Barron's Income Investing blog, http://blogs.barrons.com/incomeinvesting/

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September 16, 2016 15:47 ET (19:47 GMT)

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