The board of directors of Frontier Communications Corp. ( FTR ) has approved a hike of 5% in the company's quarterly cash dividend rate, effective from the first quarter of 2015.
The quarterly dividend will be increased to 10.5 cents per share from 10 cents paid earlier. The new quarterly dividend thus increases the company's annual dividend to 42 cents per share from the prior 40 cents. Frontier Communications plans to declare the first quarter dividend in Feb 2015, and pay it in late Mar 2015.
We believe the dividend increment is supported by Frontier Communications' strong financials, and reflects the company's confidence in successfully executing and integrating the acquisition of AT&T Inc.'s ( T ) wireline operations in Connecticut. Also, at the end of third-quarter 2014, Frontier Communications had generated $457.9 million in cash from operations.
In addition, various strategic initiatives taken by Frontier Communications, which include new product deployment, broadband expansion, new pricing plans and lucrative collaborations, augur well for long-term growth.
Moreover, the company recently raised its financial outlook for 2014 buoyed by the latest Connecticut acquisition. Frontier Communications now expects 2014 leveraged free cash flow in the range of $755.0 million to $780.0 million. Further, the company also expects capital expenditures of $575 million to $600 million and cash taxes of $75 million to $90 million.
Notably, the company has paid a total of $300.6 million in dividends in the first nine months of this year, which equals to a payout of 50% of free cash flow generated through the same period. This includes dividend payments of $100.2 million in the third quarter alone, which is equal to a payout of 67%.
Frontier Communications currently carries a Zacks Rank #2 (Buy).
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