Monster Dividends

As more than 600,000 Apple (Nasdaq:AAPL) fans preordered the anticipated iPhone 4G, sending Apple shares to gain nearly 10% within the last week of trading, the company continues to make gains on Exxon Mobil (NYSE:XOM) toward becoming the America's largest company. Currently, Apple's market cap stands at $246 billion.

Although Apple still has to make tremendous gains to achieve the same status as Exxon, the company has already exceeded Microsoft's market capitalization value by roughly $15 billion. After selling over 50 million iPhones since 2007, AT&T (NYSE:T) remains the exclusive carrier of the product.

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The Need for Dividends
Despite the growing popularity of the phone, Sprint (NYSE:S) is aggressively promoting packages and rates for the HTC EVO 4G smart phone. While Apple undoubtedly produces amazing products, they will experience continued competition as new technologies are introduced to compete with the iPhone and iPad.

A safer investment strategy, rather than following the hot stocks of the market, would be to focus a portfolio that produces a steady dividend income. For example, Apple is trading at a price-to-earnings, price-to-sales and price-to-book ratio which are considerably larger than its industry peers. Therefore, the market is placing great value on similar state-of-the-art products to be introduced that are superior to that of the competition. Although it may be possible, it is not certain, especially when companies like Google (Nasdaq:GOOG) are competing in a similar space.

AT&T
Because of their contract with Apple, AT&T is an attractive short-term and long-term investment. Customers attracted by the old and new features of the iPhone will be forced to switch providers, adding to AT&T's market share. If in the long term, the iPhone either loses its popularity or become available through other carriers, investors can fall back on AT&T's 6.6% dividend yield. Telecommunication companies, both in the United States and Canada are known to attract investors through significant dividend payouts. Bell (NYSE:BCE) currently yields 5.5%, Verizon (NYSE:VZ) yields 6.7%, while the average S&P firm yields only 1.8%.

Communication
Qwest Communications (NYSE:Q) provides essential services such as internet access, satellite digital television, phone services and a variety of other functions. In the first quarter of 2010, Q improved its EBITDA margin by 170 bps and expects margins to improve throughout the year. Qwest communications offers investors a 6% dividend yield.

Frontier Communication (NYSE:FTR) has similar types of operations, offering services to residential and wholesale customers. In its first-quarter results released last month FTR obtained a 54% operating cash flow margin and a sustainable dividend payout ratio of 52%, yielding 12.3%.

The integrated communications provider CenturyLink (NYSE:CTL), Inc operates in 33 states and carried a yield of 8.4%. In the first quarter of 2010, CTL added 70,000 high speed internet customers to its growing base, showing improved performance in such large markets as Florida, Nevada and North Carolina.

The Bottom Line
Momentum investors will surely be intrigued by Apple, yet risk adverse investors may wait for a pullback before entering into a position. However, whether or not a pullback will occur is uncertain - perhaps Apple will soar past Exxon later this year, or maybe competitors will come out with superior products.

Either way, dividend paying stocks should be added to any sort of portfolio, whether it is aggressive or defensive. While the discussed companies operate in the North American telecommunications space, diversification in terms of sectors and boarders plays an integral role when investing. (For more stock analysis, check out Diversified Dividends.)

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