Highest-Paying Dividend Stocks in Telecom

Income investors know that dialing up telco providers is a good way to secure fat payouts, but hardcore yield chasers know that you can do better than the wireless carriers that are household names.

As impressive as AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) may seem, yielding 4.9% and 3.8%, respectively -- especially at a time when their smaller, profitless wireless carrier rivals aren't declaring quarterly distributions at all -- the highest-paying dividend stocks in this niche can actually be found among the ranks of regional telcos.

Windstream (NASDAQ: WIN  ) , Frontier Communications (NASDAQ: FTR  ) , and CenturyLink (NYSE: CTL  ) all sport chunkier yields than AT&T and Verizon.

There is a good reason for that.

AT&T and Verizon have been able to easily offset declining landline revenue by growing their booming smartphone volume. Regional carriers aren't as lucky. Growth has been harder to come by at Windstream, Frontier, and CenturyLink.

They're losing landline customers, too. They are making some of that back through broadband connectivity and business services, but that isn't enough in some of the rural markets where the regional players concentrate to avoid butting heads with the national giants in major metropolitan cities.

However, a voracious appetite for the highest-paying dividend stocks will naturally lead investors to explore these intriguing regional telcos. As luck would have it, all three report next week, affording investors the opportunity to get a great snapshot of three popular equities for income investors.

Company 

Latest Quarter

EPS (estimated)

Year-Ago

Quarter EPS

Yield

Windstream

$0.11

$0.13

11.8%

Frontier Communications

$0.06

$0.05

9.8%

CenturyLink

$0.68

$0.68

5.8%

Source: Yahoo! Finance.

Don't just jump on Windstream because it has the fattest yield. For starters, it's the only one of the three companies that's expected to post a year-over-year decline in profitability next week.

However, the big reason to be careful here is that the other two regional players have recently lowered their rates.

Windstream cut its quarterly dividend from $0.1875 a share to $0.10 a share last year. CenturyLink went from shelling out $0.725 a share every three months to $0.54 a share earlier this year.

It wouldn't be a surprise if Windstream eventually follows suit.

Despite declining profitability on an annual basis for a few years, Windstream has stuck to its quarterly rate of $0.25 a share. Its CEO publicly stood by that $1 annual dividend commitment back in February, but it can only be sustainable for so long if profitability keeps going the wrong way. It also probably wouldn't be a bad thing if Windstream did announce a decrease. Investors would finally be able to exhale as Frontier and CenturyLink stakeholders eventually did.

Get your camera ready. Three important snapshots are ready to be taken next week.

Kings of the wild Frontier
When it comes to dividend yields, you won't find many higher than Frontier Communications. While its juicy dividend is tempting, every Frontier investor has to understand that it's not a sure thing. A huge acquisition has transformed the company forever. Will the move bear fruit, or are investors destined for another disappointing dividend cut? In this premium research report on Frontier Communications, we walk you through all of the key opportunities and threats facing the company.


Read/Post Comments (4) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 02, 2013, at 7:45 PM, foolretire wrote:

    Windstream did not cut it's dividend last year,....that is a typo,...I believe you meant Frontier,...

    does no one proof read these days?

  • Report this Comment On May 02, 2013, at 10:37 PM, TMFBreakerRick wrote:

    foolretire, good catch. Yes, it was Frontier. Let me get that corrected.

  • Report this Comment On May 03, 2013, at 3:18 PM, EDJMCPS wrote:

    That Frontier dividend cut to .10 was also there second dividend cut.

  • Report this Comment On May 08, 2013, at 8:58 AM, drseusphd wrote:

    First of all Windstream didn't cut its dividend last year that was CTL and FTR... Win has maintained its dollar a share 25cents a quarter since at least 2006.....

    What about the WIN, WindStream Share buy back program?

Add your comment.

DocumentId: 2404072, ~/Articles/ArticleHandler.aspx, 4/19/2014 1:42:28 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement