You may wonder why an investor would bother with an also-ran telecom company considering Verizon (NYSE:VZ) and AT&T (NYSE:T) remain so entrenched. But after Sprint (NYSE:S) popped double-digits in a single trading day this week thanks to buyout speculation, there may be some potential here on hints the industry is ripe for further consolidation.
Frontier Communications (NASDAQ:FTR) is a midcap carrier with a $4 billion market cap, and is primed for a buyout. FTR serves 27 states, and is mostly focused on rural telephone and data access. Just recently Verizon bought out Mohave Wireless, a small wireless player in Arizona that was owned by Frontier, so its footprint in underserved areas is clearly attractive to the big guys.
There admittedly isn’t too much growth in this business, and that’s why the stock is flat in the last 12 months. However Frontier is sitting on some attractive customers in regions underserved by AT&T or Verizon, making it an attractive acquisition target.
Oh yeah, Frontier throws off a dividend of 9.8% based on its 10-cent quarterly paydays. So even if FTR just treads water, this cheap stock could deliver a double-digit annual return.