Frontier Communications Corp. (NASDAQ: FTR) has the highest dividend yield in the S&P 500 Index, outside of the energy sector. This is one of those dividends that has been very difficult for many traditional analysts and investors alike to evaluate. That is why the opinions are so varied.

According to Merrill Lynch, this dividend is becoming less risky. The firm hosted Frontier’s CEO Dan McCarthy and CFO John Jureller for investor meetings in Boston, with the company preparing for the closure of the Verizon Communications Inc. (NYSE: VZ) asset purchase and trends in the core business.

What matters here is not just that Merrill Lynch reiterated its Buy rating. It has a $9.00 price target, some 72% higher than the prior $5.21 close. Then there is the 8% dividend yield to consider.

The transaction with Verizon is for $10.5 billion in an asset purchase expected to close on or about March 31. Frontier highlighted synergy expectations, operational and competitive trends in the core business and an expected smooth transition of the deal execution.

Converting the telecom network elements and the billing systems are expected to be smooth, as is the video system deal. What was unusual here is that Verizon partnered with Frontier to allow network conversions to occur before the deal close date. This has already happened in Palm Springs and was said to have been a flawless migration.

All network systems will be converted so that the business is already fully converted on the first day of the deal closure. The company said that its billing system conversion underwent multiple successful mock trials, and the video system conversion should happen gradually with Verizon’s help.

Merrill Lynch believes that the Verizon properties should have an EBITDA run rate of $1.6 billion with roughly $600 million in first-day synergies. The research team’s assumed Frontier core legacy EBITDA of about $2.1 billion should generate a total combined full-year run rate of about $4.3 billion. The analysts then subtracted $1.4 billion in capital spending, about $1.5 billion in interest expenses, another $150 million in integration costs and $200 million preferred interest, yielding about $1 billion in a run rate of free cash flows relative to dividends of $490 million.

The long and short of the matter is that this transaction and synergies should take the dividend the payout ratio down to under 40%. The analysts think that Frontier’s valuations and cash flow story looking ahead simply do not compute and should be worth far more. Their investment rationale is as follows:

Frontier has one of the best-covered dividends among all high-yield RLECs, which we view as the cornerstone of the equity value. The company is beginning to demonstrate improved operational performance and we believe upside to post-AT&T Connecticut and Verizon deal synergies, CAF regulatory support and increased broadband market share will lead to a lower yield and improved valuation.

In an effort to show both side of the coin, note that not everyone is extremely bullish on Frontier. Merrill Lynch does have the highest analyst price target of them all. The consensus analyst price target is actually $6.11. Back on March 9, Citigroup downgraded Frontier to a Sell rating from an already cautious Neutral rating. Another measuring issue to consider here is that Frontier has massive short interest, averaging about 170 million shares so far in 2016.

Frontier was last seen trading at $5.19 with a 52-week range of $3.81 to $7.50. As far as the 8% yield, its $0.42 per share annualized payout compares to expected losses from operations in 2016 and 2017. Just keep in mind that losses are different from distributable cash flows.

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