By Carla Pasternak, High-Yield Investing

After more than doubling its size by acquiring Verizon's wireline assets in mid-2010, Frontier Communications (FTR) is now the largest rural telecom provider in the U.S.

The company pays a quarterly dividend of $0.188 which amount to a yearly distribution of $0.75 per year -- one of the highest yields in the S&P 500.

Payments are taxed at the reduced dividend rate of up to 15%. Meanwhile, the dividend appears secure. For the first six months of 2011, the company generated free cash flow of $484.2 million and paid out $373.2 million, for a sustainable payout ratio of 77%.

Management is committed to maintaining its dividend. Chairman and CEO Maggie Wilderotter stated in May that Frontier planned to add 575,000 customers in the next two years to its current base of 1.72 million subscribers, thereby "maintaining healthy cash flow to support our dividend."

Thanks to the acquisition of Verizon's landline customers, revenues mushroomed between the first six months of 2011 and the comparable period in 2011.

In percentage terms, revenues grew 157%, from $1.04 billion in the first half of 2010 to $2.67 billion in the first six months of 2011.

Net income of $86.97 million rose 12% over the year-ago period. However, earnings per share dropped substantially from $0.25 in the first half of 2010 to $0.09 in the comparable period of 2011. There were three main culprits.

First, operating expenses more than tripled from $737.71 million in the first half of 2010 to $2.18 billion in the first half of 2011, mainly due to severance pay and early retirement costs.

Second, interest expense nearly doubled from $187.76 million to $334.28 million between the two periods, reflecting the additional $3.3 billion debt assumed from Verizon.

Finally, the per-share numbers were significantly reduced as the company's share count more than tripled due to the issuance of 678.5 million shares in connection with the acquisition.

For the full 2011 year, the 15 analysts following the company see revenues growing a healthy 39% to $5.26 billion. But earnings per share (before one-time items) are projected to fall to $0.26 compared with $0.48 in 2010.

Still, the company should be able to cover its dividend based on free cash flow. And in 2012, analysts project earnings per share will grow 19% from 2011 levels to $0.31, as the Verizon acquisition starts to accrete to the bottom line.

As of June 30, 2011, Frontier had $7.99 billion in long-term debt and $4.93 billion in equity, for a high but manageable debt-to-equity ratio of 1.6 times. The company covered interest expense 1.4 times, which is low but also manageable.

There are risks to consider. Frontier's ambitious goal is to add 575,000 customers by mid-2013 and at the same time cut operating costs.

If the company does not achieve this goal, earnings could suffer and the free cash needed to cover the dividend could be compromised.

Overall, if you can stomach the volatility in return for a double-digit yield, the recent pullback appears to offer an entry opportunity.

TheStockAdvisors.com​​​ is a free website that highlights stock recommendations and market commentary from leading financial newsletter advisers.