Frontier Communications (NASDAQ: FTR) and Telefonica (NYSE:TEF) are both telecommunications services companies, but which is the better business? We will compare the two companies based on the strength of their dividends, analyst recommendations, risk, profitability, institutional ownership, valuation and earnings.
Volatility & Risk
Frontier Communications has a beta of 0.76, meaning that its share price is 24% less volatile than the S&P 500. Comparatively, Telefonica has a beta of 1.27, meaning that its share price is 27% more volatile than the S&P 500.
This is a breakdown of current recommendations for Frontier Communications and Telefonica, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Frontier Communications presently has a consensus price target of $9.07, suggesting a potential upside of 19.49%. Given Frontier Communications’ higher probable upside, research analysts clearly believe Frontier Communications is more favorable than Telefonica.
Frontier Communications pays an annual dividend of $2.40 per share and has a dividend yield of 31.6%. Telefonica pays an annual dividend of $0.35 per share and has a dividend yield of 3.5%. Frontier Communications pays out -6.5% of its earnings in the form of a dividend. Telefonica pays out 50.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Frontier Communications is clearly the better dividend stock, given its higher yield and lower payout ratio.
This table compares Frontier Communications and Telefonica’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Insider & Institutional Ownership
71.0% of Frontier Communications shares are held by institutional investors. Comparatively, 0.8% of Telefonica shares are held by institutional investors. 0.9% of Frontier Communications shares are held by company insiders. Comparatively, 0.0% of Telefonica shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
Earnings and Valuation
This table compares Frontier Communications and Telefonica’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Frontier Communications||$9.13 billion||0.07||-$1.80 billion||($36.79)||-0.21|
|Telefonica||$58.75 billion||0.87||$3.54 billion||$0.69||14.30|
Telefonica has higher revenue and earnings than Frontier Communications. Frontier Communications is trading at a lower price-to-earnings ratio than Telefonica, indicating that it is currently the more affordable of the two stocks.
Telefonica beats Frontier Communications on 11 of the 16 factors compared between the two stocks.
About Frontier Communications
Frontier Communications Corporation (Frontier) is a provider of communications services in the United States. The Company offers a portfolio of communications services for residential and business customers. Its products and services include data and Internet services, video services, voice services, access services and customer premise equipment (CPE). The Company offers a range of broadband services. The principal residential service it provides is broadband Internet service. Its commercial services include Ethernet, Dedicated Internet, Multiprotocol Label Switching (MPLS), Time Division Multiplexing (TDM) data transport services and optical transport services. It also offers wireless broadband services (using unlicensed spectrum) in various markets utilizing networks that it owns or operates. In addition, the Company offers its Frontier Secure suite of products, including computer security, cloud backup and sharing, identity protection and equipment insurance.
Telefonica, S.A. is an integrated and diversified telecommunications group operating in Europe and Latin America. The Company’s services and products include Mobile business, Fixed-line telephony business and Digital services. Its segments include Telefonica Spain, Telefonica Brazil, Telefonica Germany, Telefonica United Kingdom and Telefonica Hispanoamerica (formed by the Company’s operators in Argentina, Chile, Peru, Colombia, Mexico, Venezuela and Central America, Ecuador and Uruguay). These segments are engaged in activities relating to wireline, wireless, cable, data, Internet and television (TV) businesses and other digital services in accordance with each location. It offers a range of mobile and related services and products to personal and business customers. It offers traditional fixed telecommunication services, Internet and broadband multimedia services and data and business-solutions services. It offers a range of digital services, such as Internet of Things (IoT).
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