In the following video, Fool markets analyst Mike Klesta talks with Fool contributor Dan Caplinger about how investors are seeking stocks that offer high dividend yields. Within the Dow Jones Industrials (DJINDICES:^DJI), AT&T (NYSE:T) and Verizon (NYSE:VZ) have the highest yields.
Mike and Dan discuss how the two telecom stocks are able to pay such lucrative dividends, with Dan noting that having made huge capital investments in their networks, both companies are able to collect monthly income from their millions of customers with relatively little additional expense. Moreover, because earnings based on accounting rules don't accurately reflect the amount of free cash flow available to AT&T and Verizon to pay out dividends, comparing dividend payouts to earnings can give a misleading picture of the companies' financial conditions. Mike closes by asking Dan for his views on which of the two companies offers a more compelling future for investors.