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Frontier Communications shares fall after talk of dividend suspension

Frontier Communication Corp
Wayne Scarberry | Getty Images

Shares of U.S.-based cable and internet provider Frontier Communications dropped Wednesday after Goldman Sachs downgraded the company to sell on concerns it may suspend its dividend.

The shares closed more than 10 percent lower and are off nearly 40 percent for the year, to date.

Frontier didn't immediately respond to CNBC's request for comment.

"We believe FTR may choose to suspend its dividend after 1Q17 in order to delever and build liquidity to address significant debt maturities in 2020-2022, even if it is not required to do so per its bonds' covenants," Goldman analyst Brett Feldman said in a Wednesday note. "With the stock's dividend yield nearly 2x peers', we believe the market is pricing in a 50% cut."

In the same report, Feldman reinstated a sell rating on Windstream Holdings and maintained a sell on CenturyLink, with a lower price target of $19.

Shares of Windstream fell 7.5 percent. CenturyLink shares dropped 2.4 percent, making it the worst performer in the S&P 500 telecom sector, which fell 1 percent Wednesday and was the biggest laggard in the overall index.

Frontier was replaced by Raymond James Financial in the S&P 500 earlier this week and put in the S&P MidCap 400 after new market capitalization ruleswent into effect. Frontier now has a market cap of less than $2.5 billion.

Frontier 12-month performance 

Source: FactSet