Income-hungry investors are being starved by low yields on Treasuries. Luckily, the strong returns offered by high-yielding telecom stocks can be a safe alternative. Telecoms generate stable earnings; however, investors should avoid overpaying in pursuit of high yields. That's because a yield that looks stable can quickly deteriorate. Let's peer into the world of domestic telecoms to see if Frontier Communications (FTR) can sustain its 12.4% dividend yield.
Aside from its 12.4% dividend, Frontier offers investors a payout ratio of 469% -- scary when you realize that number means that the company is paying out nearly five times as much as it earned over the past 12 months. That sky-high payout ratio makes it seem as though it'll be harder for Frontier to sustain its large payouts in the future. At first glance, Frontier's high payouts make it look like the company's biting off more than it can chew, but recent mergers and improved cash flow should put the stock back on safer ground. I think Frontier's a great buy for investors looking for an attractive yield play.
Source: Motley Fool
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What do you think of Verizons dividend for telecom? How much do you see it growing? I see this as a best of breed blue chip of telecom with a lot of room to run yet.