After a rise of roughly 60% since its March 2009 lows, many would assume the S&P 500 would not boast too many hefty dividend payers. But this simply is not the case. In fact, some of the best yielding stocks are up substantially on the year.

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As it turns out, four of the five best dividend yields on the S&P 500 (and six of the top 12) belong to telecoms. Apparently, cash flows haven't suffered in telephone and internet businesses. Here are the five best dividend yields on the S&P 500, complete with key fundamentals.

Rural Telecoms Lead the Pack
Frontier Communications (NYSE:FTR) is a provider of local and long distance telephone, satellite, internet and wireless services to subscribers predominantly in remote and rural areas. Its shares are up approximately 30% since its lows last March. The stock currently pays a very substantial 13% annual dividend and trades with a price/earnings (P/E) ratio of 16.

Windstream Corporation (Nasdaq:WIN) is another telecom with a great yield. The company pays 9.15% annually and trades with a more competitive P/E ratio of 14. Windstream shares also have risen about 60% since the spring.

Windstream competes head-to-head with Frontier Communications in the rural and small town telecom market across the United States. In November 2009, Windstream made three new acquisitions.

Cost-Cutting Pays Off
Qwest Communications (NYSE:Q) is a telecom services provider in the western U.S. Qwest has an annual dividend yield of 7% and trades with a P/E ratio of 10. The company recently announced aggressive in-house cost-cutting initiatives, including curtailing merit increases to management for 2010.

CenturyTel (NYSE:CTL) is a rural and small- to mid-size city telecom service provider. Its stock trades with a P/E ratio of 12 and carries a healthy annual dividend of 7.70%. CenturyTel has a market cap in excess of $10 billion.

Cigarette company Altria Group (NYSE:MO) closes out the list of the largest dividend payers on the S&P 500. Altria pays investors 7.00% annually to hold the company's stock and trades with a P/E ratio of 13.

The Wrap
It's the dividend payers that typically offer the best returns on a long-term basis, and these highly capitalized, strong cash generating companies should prove no exception. That so many of the leaders should come from a single sector speaks volumes about the investment potential in that field. (To find out how to take advantage of dividend paying stocks, refer to Build A Dividend Portfolio That Grows With You.)

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Tickers in this Article: CTL, MO, WIN, FTR, Q

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