Analysts at Standard & Poors wonder how long U.S. telecommunications firms can maintain their current level of dividends. The big problem is that dividend payout ratios are consuming nearly all available free cash flow.

Verizon dividends accounted for around 55 percent to 60 percent of free operating cash flow and 70 percent of AT&T free operating cash flow in 2011, according to Standard & Poors.

S&P says the FOCF payout should remain stable in 2012 “although longer term competitive pressures could cause the FOCF payout to increase.”

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Dividends of Frontier and Windstream consumed almost all of FOCF in 2011. With its recent dividend cut, S&P estimates that Frontier’s dividend will fall to around 50 percent of FOCF in 2012.

It expects Windstream’ s dividend will be close to 80 percent of FOCF in 2012, the highest in the industry, but “we believe it may be challenging for Windstream to maintain its current dividend over the next few years.”

CenturyLink’s FOCF payout was around 87 percent in 2011, which does not include a full year of results from recently acquired)Qwest and Savvis. S&P says “CenturyLink’s payout will be around 55 percent to 60 percent over the next few years, although maintaining its dividend longer term may be difficult if it can’t stabilize its revenue.”

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