Motley : Look for Frontier's Dividend Yield to Disappear
You should look for Frontier’s 10% dividend yield to disappear altogether due to crushing debt and a declining market for wireline services, even in rural areas, as companies such as AT&T and Verizon make inroads into those markets with wireless products. Moreover, look for AT&T and Verizon to garner small amounts of overall growth from their wireless segments. If you invest in these two companies expect them to function more like bonds with basically a flat line stream of dividend income with small to no increases. If you want growth, look beyond the old telecommunication bellwethers.
I will read up on goodwill tonight. Does that make me happy? Everybody seems to make this an issue lately about goodwill. I do recognize it's part of the balance sheet. I just don't understand it. Even Robert has an issue with it when he is buying companies and most of us are in the #$%$ lol
"MF( take the initials for either title you choose) likes to bash Frontier all the time. SA is more favorable towards FTR and we should see something soon from them that is much more positive."
Pointing out FTR's debt relative to equity and cash flow capacity isn't bashing in my book.
They should have said that debt is not only more than 200% of equity, but that FTR's equity residual is dwarfed by FTR's Goodwill asset -- without Goodwill FTR would have no equity at all -- and the stated equity it does have is all Goodwill -- all from the appraisal of acquired companies going concern value -- and the3 results of the VZ acquisition calls all of the prior acquisitions into question. That asset has to be the focus in any serious look at FTR.
You also have to consider the growing retirement gap of over $1b which knocks out one year of FTR's current cash flow. As these liabilities grow relative to FTR's free cash flow there will come a time when the union is going to demand that more of FTR's cash flow goes to retirement funding. Last year after the retirement funds income + FTR's contribution the fund went down because cash payments exceeded income + contributions -- it's going in reverse.
At some point it looks like FTR will have to give up some of the company via an ownership contribution to the pension funds. This could be done by creating a preferred stock issued to the funds -- the dividends would have to be paid before a dividend is declared on FTR common stock. This should be a big point in FTR's transition from a payroll machine to a retirement machine -- not only for the rank & file but also for executives so you know it will be funded.
Don't forget S&P downgraded FTR's debt because of the kind of financial performance seen in Q3 2012 -- when Revenue dropped by 3% but EBITDA dropped by 5% and it should have been the other way around. FTR's operating leverage is running in reverse.