11% Yield, Insider Buying, and Under $5?

07/27/2012 9:45 am EST


The staff at DividendChannel.com highlight a stock that seems to have all the right things going for it.

In this article, we look through the most recent Dividend Channel ''DividendRank'' report, and then we cherry pick a company that has experienced insider buying within the past six months.

The officers and directors of a company tend to have a unique insider's view of the business, and presumably the only reason an insider would choose to take their hard-earned cash and use it to buy stock in the open market, is that they expect to make money. Maybe they find the stock very undervalued, or maybe they see exciting progress within the company—or maybe both.

So when stocks turn up that see insider buying, and are also top-ranked, investors are wise to take notice. One such company is Frontier Communications (FTR), which saw buying by Director Jeri B. Finard.

Back on June 1, Finard invested $177,500 into 50,000 shares of FTR, for a cost per share of $3.55. In trading on Wednesday, shares were changing hands as low as $3.59 per share, which is 1.1% above Finard's purchase price. It should be noted that Finard has collected 10 cents a share in dividends since the time of their purchase, so they are currently up 3.9% on their purchase from a total return basis.

The chart below shows the daily performance of FTR shares, along with its 200-day and 50-day moving averages:

Click to Enlarge

Next: FTR's low point...


FTR's low point in its 52-week range is $3.06 per share, with $5.43 as the 52-week high point—that compares with recent trades around $3.60. By comparison, below is a table showing the prices at which insider buying was recorded over the last six months:

Click to Enlarge

The DividendRank report noted that among the coverage universe, FTR shares displayed both attractive valuation metrics and strong profitability metrics. For example, the recent FTR share price of $3.605 represents a price-to-book ratio of 0.8 and an annual dividend yield of 11.10%. By comparison, the average company in Dividend Channel's coverage universe yields 4% and trades at a price-to-book ratio of 1.8.

The report also cited the strong quarterly dividend history at Frontier Communications, and favorable long-term multi-year growth rates in key fundamental data points.

The report stated, ''Dividend investors approaching investing from a value standpoint are generally most interested in researching the strongest most profitable companies, that also happen to be trading at an attractive valuation. That's what we aim to find using our proprietary DividendRank formula, which ranks the coverage universe based upon our various criteria for both profitability and valuation, to generate a list of the top most 'interesting' stocks, meant for investors as a source of ideas that merit further research.''

The annualized dividend paid by Frontier Communications Corp is 40 cents per share, currently paid in quarterly installments, and its most recent dividend ex-date was June 6. Below is a long-term dividend history chart for FTR, which the report stressed as being of key importance. Indeed, studying a company's past dividend history can be of good help in judging whether the most recent dividend is likely to continue.

Click to Enlarge

This article was written by the staff at DividendChannel.com.

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