Take a venture into Frontier
Dear Mr. Berko:
I’m looking at Frontier Communications after its buyout of Verizon’s land line business. The $1 dividend, according to Yahoo Finance, yields 14 percent, and I was thinking of buying 700 shares as a gamble on a high-yield stock. What do you think? Meanwhile, what can you tell me about the new federal real estate tax? Our son, who is in the title insurance business, says that Congress will pass a 3.8 percent tax on all real estate sales in the next session. He insists his source is “impeccable” and is advising us to sell our home now. Don’t the voters have any idea what they vote for? We were going to sell in two years, downsize and move to your neck of the woods, where the winters are warm.
T.R., Joliet, Ill.
Dear T.R.:
Holy cannoli and tiramisu, too. Frontier Communications Corp. (FTR-$7.66), formerly known as Citizen Communications, just gobbled up a chunk of Verizon CommunicationsInc. (VZ-$28.51) wire line assets and in the process issued $5.4 billion of new FTR shares to VZ stock holders.
But you gotta stop relying on Yahoo for financial information. Those fools wouldn’t know a dividend from a deutschmark. FTR reduced its dividend from $1 to 75 cents, but it will probably take Carol Bartz (Yahoo’s inutile CEO) and her clueless understrappers a year to figure that out. Yahoo’s financial data is dangerously unreliable.
Frontier, prior to digesting Verizon’s wire line asset, was a $2.1 billion revenue provider of most communications services known to man except wireless. FTR is a rural, small-town phone company that does broadband, Internet, data transmission, directory assistance, white pages, yellow pages, green pages (some rural towns prefer green), TV, cable and so on and provides wholesale services to other carriers. But it does not provide mobile or wireless phone services.
The VZ purchase triples FTR’s customer base and cements its position as the largest rural carrier in the United States, but it’s hugely dilative to shareholders and significantly increases Frontier’s debt. However, even with debt increasing to $8 billion, the acquisition should triple FTR’s annual free cash flow to about $1.5 billion from about $450 million. This places the current 75-cent dividend on firm ground with a strong 9.8 percent yield.
I think FTR should perform well over the coming few years, and I would be comfortable owning 700 shares as a reasonable gamble.
Would you believe that a member of the Florida Legislature (one of the most crooked legislatures in the nation) also told me that the Obamacare bill imposed a 3.8 percent tax on the sale of all real estate? This numbskull lawyer legislator, whom I’ve known for 30 years, also told me that the Florida Legislature is considering a $10 million tax on the sale of all real property in the state.
Well, the 3.8 percent Obamacare tax is a hoax that is gleefully making the rounds as if it were gospel. It’s incredible that so many intelligent people are so ready to attribute so many far-fetched, outlandish claims to the Obama legend. Now, I admire Obama as much as any conservative, but this rumor really takes the cupcake. It ain’t true, and here’s a simple explanation about what’s really happening:
Beginning in 2013, if you have a profit on your home above the $250,000 individual capital gains threshold, you will pay a 3.8 percent tax on the amount above the threshold amount. If you make a $300,000 profit selling your home, you will owe the Internal Revenue Service 3.8 percent of $50,000 ($300,000 less $250,000), or $1,900. If you’re married, the threshold rises to $500,000.
If the Florida Legislature passes a $10 million tax, similar formulae will apply. This country is living proof that people who go to the polls decide nothing, but the people who count the votes decide everything.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775 or e-mail him at mjberko@yahoo.com. © 2010 Creators.Com
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