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Regional telecom Alaska Communications Systems (Nasdaq: ALSK  ) looks ice-cold today. Shares took a precipitous fall overnight on the release of third-quarter results. More precisely, Alaska dropped on news that one of the sector's most stable dividends might get a haircut.

Third-quarter sales of $90.3 million were in line with analyst estimates while the $0.02 net loss per share was a serious disappointment. Forward guidance was unchanged from earlier estimates. Revenues per subscriber are on the rise, the 4G LTE network build continues as planned, and subscriber counts are pretty stable. So far, so ... well, acceptable.

But on the conference call, management dropped this bomb on investors: "Our board has been reviewing our dividend policy."

That's often code for, "We may need to slash or suspend our payouts." Since many investors are drawn to Alaska by its 12% dividend yield (as of last night; 15.5% at today's prices), that's like telling hockey fans that indoor ice rinks might get outlawed. It hurts even more when you consider Alaska's ultra-dependable payout history: The company has paid the same $0.215 quarterly divvy per share since the first quarter of 2006.

CEO Anand Vadapalli then bent over backward to remind analysts to "take one step at a time, and not get ahead of ourselves." Dividend changes may or may not be under way, but investors should know when the board is looking at a policy change.

When asked whether dividends take priority over the LTE build, Vadapalli shot it right back to the board again. Dividend policy is up to the board of directors and management must adjust business strategies to the hand they're dealt. If that means accelerating or slowing down network buildouts, or even taking on new debt just to keep both dividends and growth plans healthy, then that's another issue entirely.

Alaska Communications is certainly not the only double-digit yield payer in the telecom sector. Other American regionals such as Frontier Communications (NYSE: FTR  ) and Otelco (Nasdaq: OTT  ) have also joined the club, and CenturyLink (NYSE: CTL  ) comes very close with an 8% yield. Looking outside our borders, you'll also find 11% yields or better from global giants France Telecom (NYSE: FTE  ) and Telefonica (NYSE: TEF  ) .

So if Alaska Communications' dividend well runs dry, you'll find plenty of alternative high-income plays in the same sector. But how do you pick the right stock? We've prepared a special report to help you separate the dividend wheat from the chaff. In "Secure Your Future With 11 Rock-Solid Dividend Stocks," you'll learn the principles you need in order to build a bulletproof income portfolio -- and yes, there are telecom stocks in the mix.

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Fool contributor Anders Bylund owns shares of France Telecom but holds no other position in any of the companies mentioned. The Motley Fool owns shares of Telefonica. Motley Fool newsletter services have recommended buying shares of France Telecom. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

Read/Post Comments (4) | Recommend This Article (7)

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  • Report this Comment On November 09, 2011, at 6:21 PM, mychookie wrote:

    I bought this in 2004 and it has done wonderful for me. I bought more about 6 months ago becuase I couldn't figure out how such a strong dividend could be out there....maybe I was wrong.

  • Report this Comment On November 09, 2011, at 8:34 PM, akakroke wrote:

    I'm with you mychookie and am really tempted to buy another 50% of my current holding at this crazy, low price but Anders makes good points. At least when reading the SEC statement, it indicates the dividends are scheduled to continue for the next couple of quarters anyway....

  • Report this Comment On November 10, 2011, at 7:52 AM, akakroke wrote:


    Also take consolation in this analysis:

  • Report this Comment On February 09, 2012, at 8:38 PM, vaderblue wrote:

    It's a shame. When you see the market caps drop and pullback on dividends for saving cash this either means these people were there only for the dividend or the company is poorly managed because they can't sustain growth of their products and services.

    The Board also should be more conservative based on leverage cash. Levered cash should be reserved for paying divdiends and it appears to me these companies need a financial system

    based on this reserve+outstanding shares-less

    preferred stocks-based on payout ratio.

    We know mostly dividends are to entice investors to raise capitol but if they can't reserve cash to meet these payouts then here we are.

    Some CFO's are not doing there jobs planning for cash growth vs cash decline.

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