Change is good in the telecommunications services industry. With so many companies standing firm and keeping their sleepy operations the same, it's refreshing to see CitizensCommunications (NYSE:CZN) fighting for change while still paying an extremely attractive dividend.

The company is a niche player, which usually keeps it off the radar of industry leaders AT&T (NYSE:T), SBC Communications (NYSE:SBC), Verizon (NYSE:VZ), Sprint (NYSE:FON), and BellSouth (NYSE:BLS).

If the average investor glanced at Citizens Communications' third-quarter earnings release, seeing the company lose money might be a cause for some concern. However, you must put the loss in context of the company's present operating condition and related strategy.

Citizens has recently hired a new president and CEO, Maggie Wilderotter, a dynamic leader with extensive experience at AT&T Wireless and Microsoft (NASDAQ:MSFT). The company has also "flipped" its board of directors by naming a new chairman and adding a few new board members. Citizens recorded $75.9 million of pre-tax expenses in the quarter related to the management succession and also took a charge of $20.1 million related to the early retirement of debt. These write-offs will help create increased shareholder value in the future.

Although the telecom industry has been a bit sleepy over the past five years, opportunities for investors to unearth value still exist. The story emanating from Citizens Communications is cash flow and dividend yield. The company's free cash flow grew 22% in the third quarter (to $131 million), and its quarterly dividend represents a payout of 63% of this cash flow. The bottom line is that most companies are not this efficient with their cash.

In addition to paying a $0.25-per-share dividend, the company retired $414 million of debt in the quarter (paid with cash flow). Citizens has retired $514 million of debt so far in 2004 and expects to save $28 million per year in interest expense from the debt it retired in the third quarter.

I look for the new management team to make a few minor acquisitions to bolster the company's revenue generating units, access lines and high-speed Internet/data subscribers. The number of high-speed data subscribers increased 77% in the quarter, and the company will probably leverage this strength going forward.

If you're an income investor, your portfolio should include Citizens Communications. The company's shares offer an extremely attractive dividend yield of 7.42%. The cash-generating strength and efficiency of this company cannot be overlooked.

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Fool contributor Phil Wohl spent more than 12 years on Wall Street and was a telecom analyst for much of that time. He does not own shares of any of the companies mentioned.