| Otelco Income Deposit Securities Yahoo Ticker OTT Recent Price $14.46 Current Yield 11.4% Quarterly Dividend .42 ex-dividend Date 12/11/2009 Dividend Payment Date 12/31/2009 |
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| Description Otelco Inc. is a full service telecommunications provider, offering a wide array of communication services including telephone, long distance, Internet, broadband services and television in areas of North Central Alabama, Maine, Western Massachusetts, Central Missouri, and Southern West Virginia whose local community involvement dates back to the early 1900's. Whether it is providing residential and business class service services in our rural territories or comprehensive business solutions throughout the state of Maine, the solid foundation, rich history and strong forward-moving commitment to enhance technology and expand services allows Otelco to be a successful service provider in the rural marketplace. Commentary Otelco is similar to many other rural focused telphone companies around the United States--they gather up small systems and castoffs from some of the large telecoms (such as Verizon etc.) to form larger rural systems. Recently a similar company, Iowa Telecom, agreed to be acquired by Windstream---the 5th largest wireline company (see news of Windstream and some other telecom info here). We expect this space will continue to consolidate and we think getting paid 11.4% to wait for Otelco's turn is a great return. Note that this is a hybrid security. It is part debt and part common shares. Each unit represents 1 Class 'A' common share AND $7.50 in 13% subordinated debt. The debt portion is callable after 12/30/2011. There are a small number of Class 'B' commons shares outstanding (about 500,000)--but these do not trade publicly. Otelco is not unlike many high yield securities in that they pay a large part of their positive cash flow out in dividends and interest. Thus it is important to review the cash flow statement of the company and not only the income statement. Disclosure---we will be purchasing a 1/3 position in this company this week and then likely two additional 1/3 positions over the next 30 days. This is not a recommendation to buy any security---but is only meant to point out potential opportunities which may or may not fit an individuals investment needs. The companies website is here and should be visited by those considering purchasing this security. The companies latest 10-Q filing is here. |
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