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Tickers in this Article: VZ, T, FTE, TEF, BCE, CTL, WIN, NZT
Some of the best dividend-paying stocks are found in the utility sector. Utilities usually have a stable business which does not have the enormous growth opportunities which are found in the technology sector. As a result, the firms can afford to distribute earnings in the form of dividends to shareholders rather than retaining all funds for future growth. A significant downside of investing in the utility sector is the limited capital appreciation offered by the regulated and very competitive market.

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Nonetheless, the telecom industry is a prime area of the technology sector to which dividend seeking investors can turn. Many North American and international telecommunications corporations which offer dividends in the 5% range also have the growth potential which is not apparent with the utilities.

Accidental High Yielder
Telecom Corp of New Zealand (NYSE:NZT) supplies communication, technology and information services to Australia and New Zealand. Although the stock has not performed well since within the past year, losing approximately 5% of its value, NZT pays a very attractive 6% to its shareholders. The shares are currently trading at $8.13 but analysts have an average target price of $7.86. NZT should appeal to contrarian investors and those seeking pure dividend plays.

American
Verizon (NYSE:VZ) and AT&T (NYSE:T) are two well-known American telecom companies which are currently yielding 5.6% and 5.75% respectively. In addition to very similar dividend yields, both firms have had similar year-to-date performances, as the two companies saw their share price rise by slightly less than 5%. However, unlike AT&T which is expected to increase in value based on analysts' forecasts, Verizon, which is trading at a slightly higher P/E ratio, trading at above its predicted intrinsic value.

European
The European telecoms can also serve as beneficial additions to the dividend portfolio. French telecom, France Telecom (NYSE:FTE) is currently yielding 8.2% while the Spanish telecom giant, Telefonica S.A. (NYSE:TEF) is yielding an impressive 7.5%. In contrast to the American telecoms, which saw their markets caps increase through 2010, both of these European firms performed worse than Telecom Corp of New Zealand. Both of these firms experienced an over 15% reduction in the market caps within the last year.

Top Performers
Windstream Corporation (Nasdaq:WIN), CenturyLink Corporation (NYSE:CTL) and Canadian BCE Inc. (NYSE:BCE) have all had stellar years as their shares increased between 34%-36% in 2010. In addition, these three stocks offer large dividends - 7.2% for Windstream, 6.4% for CTL and 5.2% for BCE. Furthermore, these firms have solid long-term fundamentals for the value investor.

The Bottom Line
While high dividend payouts are usually common in slow growing industries and sectors, telecom stocks fall outside of this stereotype. Dividend seeking investors should look into including some of the aforementioned names into their investment portfolio.

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