Lastly, we have much-maligned Frontier Communications Corp (NASDAQ:FTR), with 23.5% of its float short. Frontier is a solid company, undervalued when compared to the rest of the telecom sector and producing strong free cash flow that easily covers the dividend and allows the company to pay down debt. Indeed, during the second quarter of this year, the company reduced its total debt pile by 3%, taking debt reduction so far this year to a total of 9%.
Free cash flow has averaged $100 million for the last four quarters, covering the dividend, which costs the company $100 million in total. Currently yielding 8.6% and well covered, the dividend is enough of a reason to buy the stock in itself.
Furthermore, Frontier Communications Corp (NASDAQ:FTR) is undervalued compared to the rest of the telecom sector on a price-to-free-cash-flow basis, trading at a ratio of 12.8 compared to the sector average of around 20.
Unless Frontier Communications Corp (NASDAQ:FTR) hits a major snag, the company does not look to be failing. Growth is slow, but cash flow is strong, the dividend is well covered, and management is repairing the balance sheet. If anything, Frontier is a good income play for the future.
In summary, these three companies are all short favorites because of short-term influences. In the longer term, the investment theses for all three companies are solid, and each business looks poised for future growth.
The article Three Hated Stocks That Should Be Loved originally appeared on Fool.com and is written by Rupert Hargreaves.
Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool owns shares of Sturm, Ruger & Company.
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