For Income Investors: 2 Companies Going Ex-Dividend September 5

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 |  Includes: CNI, CP, CTL, FTR
by: Matt Schilling

Many income-based investors use a strategy involving purchasing shares on or before the company's ex-dividend date. On the ex-dividend date, the person who owns the security will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend. That said, there are two companies that will be going ex-dividend on September 4.

Frontier Communications (NASDAQ:FTR), which closed trading on Tuesday at $4.56/share, will be going ex-dividend at the close of trading on Wednesday, September 5. The Stamford, Connecticut firm, which currently yields 8.70% ($0.40), provides communications services for residential and business customers in the United States. The company offers local and long distance voice services, including basic telephone wireline services to residential and business customers; and packages of communications services. It also provides data and Internet services comprising residential services, such as high-speed Internet, dial up Internet, portal and e-mail products, and hard drive back-up services; commercial services, such as ethernet, dedicated Internet, multiprotocol label switching, and TDM data transport services; and wireless data services.

When it comes to FTR, there are two catalysts that potential investors should find attractive and they are the company's returns on both assets and equities when compared to industry competitors and the company's profit margins over the last year. In the last 12 months, FTR has demonstrated a return on assets of 3.85% and a return on equity of 2.59%, whereas Century Link (NYSE:CTL) has only managed to demonstrate a return on assets of 2.97% and a return on equity of 2.48%.

The second catalyst to consider in terms of FTR, from a comparative point of view, is the company's operating margins over the last year. In the last 12 months, FTR has demonstrated an operating margin of 21.04%, which isn't all that great, but when we compare that number to CTL (which only demonstrated an operating margin of 14.13%); we'll notice FTR clearly outpaces some of its competition.

Canadian National Railway (NYSE:CNI), which closed trading on Tuesday at $90.73/share, will be going ex-dividend at the close of trading on Wednesday, September 5. The Montreal, Quebec, Canada-based firm, which currently yields 1.70% ($1.52), together with its subsidiaries, engages in rail and related transportation business in North America. It provides transportation for various goods, including petroleum and chemicals, metals and minerals, forest products, coal, grain and fertilizers, and intermodal and automotive products. The company operates a network of approximately 20,000 route miles of track that spans Canada and mid-America, connecting the coasts of the Atlantic, the Pacific, and the Gulf of Mexico.

When it comes to CNI, there is one primary catalyst that potential investors should find attractive and that is the company's profit margin when compared to some of its direct industry competitors. In the last 12 months, CNI has demonstrated a profit margin of 27.76%, whereas Canadian Pacific Railway, Ltd. (NYSE:CP) has only managed to demonstrate a profit margin of 11.89%.

Final Analysis

Potential investors looking to establish a position in either FTR or CP should do so with a moderate position and add to that position as dividend and earnings announcements approach. Although both companies currently have somewhat attractive yields (FTR 8.70% and CNI 1.70%) I'd continue to watch the growth of both companies' profit margins over the next 12 months.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.