Telecoms Sector Rings in the Dividends - FTR, T, VZ, CTL, WIN, Q

Investors seeking high divided yielding stocks would do well to look at the yield on offer in the telecommunications sector (Telco’s) on the S&P500.

The top six stocks all yield over 5.5%, which is healthy in anybody's language.

Frontier Communications Corp (FTR) leads the pack offering a whopping 12% followed by Windstream Corporation (WIN) with 8.78%.

Frontier (FTR) is one of the largest suppliers of High-Speed Internet, Digital Phone and Television services in the US and the company recently bought approximately 4.1m access lines from Verizon Communications (VZ) to its grow its network.

Established in July 2006 as a result of a spin-off from Alltel and a merger with Valor Communications Group, Windstream Corporation (WIN) offers telecommunications services to residential and business customers in rural communities in the United States. The company has more than 3.4m access lines in 23 states and around 1.3m high-speed Internet customers generating more than $4bn in annual revenue.

Both companies throw off high levels of cash each year with Frontier (FTR) delivering around $152m for the first quarter of 2010 while Windstream (WIN) has indicated that it expects to generate $770m to $810m in adjusted free cash flow in 2010.

The other big dividend payers in the sector include CenturyTel Inc (CTL) at 7.8%, Verizon (VZ) with a yield of 6.3%, AT&T (T) at 6.1% and Qwest Communications (Q) with a yield sitting at 5.6%.

One interesting aspect when looking at the Telco’s is that companies operating in this sector provide a mix of dividend and growth prospects. Many of these companies are continuing to roll out infrastructure in both the mobile and television sectors as users consume more content via handheld devices.

Verizon (VZ) for instance is investing heavily in its FiOs offering which is a bundled home communications (Internet, telephone, and television) service, operating over a fiber-optic communications network. In the first quarter of 2010 Verizon signed up 196,000 new FiOS Internet customers and 174,000 new FiOS TV customers on to its fiber-optic network.

With increasing amounts of digital content being pushed across the world via various social media channels, there will be increasing demand for high speed connectivity for mobile phones, internet and digital television and this will create increased demand for the services offered by the Telco’s.

Be warned: it’s not all plain sailing as competition in the sector is fierce and revenues from fixed-lines are decreasing across the board. However, for investors seeking a mixture of dividend and growth prospects, this sector makes for an interesting opportunity.