On my way through the first-quarter earnings release for VALOR Communications Group (NYSE:VCG) Monday morning, I noticed the yield on Yahoo! Finance said 10.9%.

I've seen yields of 8% to 9% on rural telecom carriers, but my initial thought was that this was a data error. Some double-checking proved the company is indeed paying out $0.36 per share each quarter, which works out to an annualized yield of 10.9% at current prices. So here's the real question: Is the yield sustainable?

This quarter's earnings show that it appears to be, if the company can maintain its revenues and costs. But investors should realize that the yield is basically the full return with VALOR. Growth is unlikely, and a slow decline is not out of the question. For the quarter, the company's revenues were essentially flat with last year's. VALOR swung to a profit in the quarter by reining in operating expenses and reducing the interest expense on its debt.

Because an investment in VALOR is primarily an investment in the dividend yield, the most important item is the company's free cash flow. VALOR's dividend payment comes in at $25.1 million per quarter. In this quarter, VALOR's free cash flow (operating cash flow minus capital spending) came in at $31.6 million, and on an owner's earnings basis (net income plus depreciation minus capital expenditures), the company earned $27.8 million. Both are an improvement over last year, but more importantly, both cover the dividend.

What may change things is VALOR's acquisition of the landline business of Income Investor selection Alltel (NYSE:AT). I haven't looked in detail at how much VALOR is paying for Alltel's business, or how the purchase is being financed. These two factors are important to the dividend and its sustainability.

While I'm curious about VALOR Communications, I do come back to the same thought I have when I look at Iowa Telecommunications Services (NYSE:IWA) and FairpointCommunications (NYSE:FRP). That is, why did these companies become public? These aren't businesses that needed capital to expand and grow. If you're considering these companies for an investment, don't lose sight of the fact that they're most likely businesses that will slowly decline, and your ability to earn a return on your investment is tied to the dividend payment and the speed of that decline.

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Nathan Parmelee has no financial interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.