Cramer Says Sell Frontier (FTR): "Size Isn't Everything" When it Comes to Dividends (AAPL, T, VZ, WIN)
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Despite a broader market rally today, Frontier Communications (NYSE: FTR) is down about 1.2% to $7.93, as Jim Cramer made some bearish comments about the stock.
The stock, which currently pays out a quarterly dividend of $0.1875 per share, or $0.75 annualized, was one of dividend investors go-to favorites, with a nice yield of 9.5%. However, the dividend was recently dropped 25% from its prior rate of $1.00 per share. Why? The company needed to free up some cash to buy wireline services from Verizon (NYSE: VZ), which made it the second largest wireline provider in the U.S.
But, Cramer says, the numbers don't work out.
The company is willing to shell out the $0.75 per share dividend annually, but is only looking to bring in $0.49 per share for the year, according to recent analyst estimates. The payout ratio (dividends versus earnings) is 1.53, compared to a more reasonable 0.72 for AT&T (NYSE: T), 0.85 for CenturyLink (NYSE: CTL), and even 0.87 for Verizon.
The company is shelling out more money than its bringing in!
To be fair, common shares of FTR have gained about 19% over the last 52-weeks, but CTL is up almost 30%, VZ is up 25%, and T is at least up 12% (though investors have been weary of AT&T's coverage issues, which went down as users increased their data usage with Apple's (Nasdaq: AAPL) iPhone).
Cramer has the stock on his Sell Block, and is recommending either CenturyLink or Windstream (NYSE: WIN) as an alternative. He said that "size doesn't isn't everything" when it comes to dividends.
Notably, WIN, with a yield of 7.7%, is still paying out more than its bringing in, at a ratio of 1.30.
The stock, which currently pays out a quarterly dividend of $0.1875 per share, or $0.75 annualized, was one of dividend investors go-to favorites, with a nice yield of 9.5%. However, the dividend was recently dropped 25% from its prior rate of $1.00 per share. Why? The company needed to free up some cash to buy wireline services from Verizon (NYSE: VZ), which made it the second largest wireline provider in the U.S.
But, Cramer says, the numbers don't work out.
The company is willing to shell out the $0.75 per share dividend annually, but is only looking to bring in $0.49 per share for the year, according to recent analyst estimates. The payout ratio (dividends versus earnings) is 1.53, compared to a more reasonable 0.72 for AT&T (NYSE: T), 0.85 for CenturyLink (NYSE: CTL), and even 0.87 for Verizon.
The company is shelling out more money than its bringing in!
To be fair, common shares of FTR have gained about 19% over the last 52-weeks, but CTL is up almost 30%, VZ is up 25%, and T is at least up 12% (though investors have been weary of AT&T's coverage issues, which went down as users increased their data usage with Apple's (Nasdaq: AAPL) iPhone).
Cramer has the stock on his Sell Block, and is recommending either CenturyLink or Windstream (NYSE: WIN) as an alternative. He said that "size doesn't isn't everything" when it comes to dividends.
Notably, WIN, with a yield of 7.7%, is still paying out more than its bringing in, at a ratio of 1.30.
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