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 and Verizon 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 , Frontier Communications , and CenturyLink 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.

The article Highest-Paying Dividend Stocks in Telecom originally appeared on Fool.com.

Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Finding Stock Ideas

Learn to do your research and find investments.

View Course »

What Is Your Risk Tolerance?

Answer the question "What type of investor am I?".

View Course »

Add a Comment

*0 / 3000 Character Maximum

1 Comment

Filter by:
Rodger

Please proofread your commentary before posting....windstream did not reduce their dividend to
10 Cents per quarter, FTR did.

May 03 2013 at 11:34 AM Report abuse rate up rate down Reply