1 Great Dividend You Can Buy Right Now

Dividend stocks are everywhere, but many just downright stink. In some cases, the business model is in serious jeopardy or the dividend itself isn't sustainable. In others, the dividend is so low it's not even worth the paper your dividend check is printed on. A solid dividend strikes the right balance of growth, value, and sustainability.

Today, and one day each week for the rest of the year, we're going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn't to say these stocks don't share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Here is last week's selection.

This week, we're going with an international cash flow king, France Telecom (NYS: FTE) .


Viva la France!
I'll start out by admitting that France Telecom isn't the growth giant it used to be. For that matter, neither are Verizon (NYS: VZ) nor AT&T (NYS: T) , but that doesn't make them any less appealing from a dividend-income or steady-cash-flow perspective.

France Telecom has been pressured by a slowdown in spending across Europe and an increase in the value-added taxes. Based on its latest full-year results, revenue dropped by 3.3% while earnings increased by a 2.1% clip. These mixed results may not exactly inspire you to jump off your couch and click the buy button, but there are plenty of reasons to be attracted to France Telecom here.

Viva emerging markets!
First, the company's majority-owned mobile unit, Orange, continues to perform well in emerging markets. In sub-Saharan Africa, Orange logged 24.8% mobile subscriber growth year-over-year, with Mali and Guinea providing the largest boosts. Total subscribership now stands at 33.5 million customers in that region.

Domestically, France Telecom's broadband and television services have delivered reasonably strong results as well. The company's pay TV segment crossed the 5-million-subscriber barrier in fiscal 2011 and added 960,000 subscriptions during the year. It also ended the year with 14.4 million fixed broadband customers, a 5% increase from 2010.

This isn't to say that economic hiccups won't disrupt some of France Telecom's growth strategies, but for the most part, the company is executing much better than its peers. Telefonica (NYS: TEF) has struggled to grow in Spain, its own home turf, while France Telecom managed to report a 4.5% rise in revenue in the country. Similarly, Telecom Italia (NYS: TI) saw growth slow in previously faster-growth countries in 2011 and saw its greatest strengths from South American countries.

With France Telecom predicting that its operating cash flow will be around $10.6 billion in 2012 based on current exchange rates, and that it plans to pay out approximately 40%-45% of this cash flow in the form of a dividend, it's tough not to get excited! This means shareholders can expect a return of somewhere in the neighborhood of $4.2 billion to $4.7 billion per year (assuming the markets cooperate). As no dividend slouch, here's France Telecom's recent payout history:

Source: Dividata. Note: France Telecom pays out semi-annual and sometimes only annual dividends.

I'm aware this payout history looks like a bad case of turbulence, but these huge payouts have resulted in a history of top-notch yields.

FTE Dividend Yield Chart

FTE Dividend Yield data by YCharts.

If I had my choice between domestic telecom services giants like Verizon and AT&T -- which are generally constrained by their own geography and have dividends normally in the 5% to 6% range -- versus France Telecom, which has exposure to high-growth emerging markets and has paid out a much fatter annual stipend than these domestic names, I think the choice is obvious.

Foolish roundup
If that argument didn't do it for you, then may a quick glance at France Telecom's metrics will! Currently, the company is trading right around book value, at just eight times forward earnings and (my favorite part) just 2.2 times cash flow. Those collective figures represent potentially the cheapest overall value for the company in a decade. There's a reason the Fool's own Anand Chokkavelu made this his stock to buy in March.

If you're craving even more dividend ideas, I invite you to download a copy of our latest special report, "Secure Your Future With 9 Rock-Solid Dividend Stocks," which is loaded with income-producing companies hand-selected by our top analysts. Best of all, this report is free, so don't miss out!

At the time this article was published Fool contributor Sean Williams has no material interest in any of the companies mentioned in this article. You can follow him on Motley Fool CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of France Telecom. Motley Fool newsletter services have recommended buying shares of France Telecom. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy that can hear you now.

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