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The top dividend-paying telecommunication stocks had a very solid first quarter, due in part to the fact that the first six weeks of the quarter were a nightmare as the market was hit extremely hard. Like utility stocks, many investors rush to telecom companies in times of market duress as they are perceived as much safer with less volatility. With big gains in the bag, some on Wall Street are turning bearish on the sector.

One of those we cover that is less than thrilled with the overall sector is UBS. The firm has the sector rated at Underweight, as it and others see many of the stocks vulnerable in a rising rate environment. UBS also notes that the rise in the sector lifted multiples, which are traditional fairly low. UBS does have four stocks on the list that are the equity preference or bellwether members. Here we cover the three that pay large dividends.

AT&T

This company had an outstanding first quarter from a stock price standpoint and could be poised to go higher. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.

With its shares trading at a very cheap 12.5 times estimated 2016 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic but increased device financing plans.

AT&T has been focusing on the IP VPN and Ethernet services. This outstanding business model, along with the decline of Verizon’s market share in the arena, has helped the company meaningfully grow its revenues from strategic business services. Apart from taking appropriate technical measures, the company has collaborated with big cloud service providers like Amazon Web Service and data center operators to provide Ethernet connections.

The company reported adjusted first-quarter earnings of $0.72 per share on revenue of $40.5 billion back in April. Its revenue rose 24% from the year-earlier period primarily due to the July 2015 acquisition of DirecTV for $49 billion in equity value. The company added 2.3 million wireless subscribers during the first quarter. About 328,000 of the additions were DirecTV net adds. The company’s Entertainment Group broadband grew with 186,000 IP broadband net adds.

AT&T investors are paid a huge 4.88% dividend. The Thomson/First Call consensus price estimate is listed at $39.55. The stock closed most recently at $39.31 per share.
CenturyLink

This is the largest of the rural local exchange carriers (RLECs) and is expected to continue get a large dose of government money to provide continuing internet service in rural areas. CenturyLink Inc. (NYSE: CTL) is a global communications, hosting, cloud and IT services company enabling millions of customers to transform their businesses through innovative technology solutions.

CenturyLink offers network and data systems management, Big Data analytics and IT consulting, and it operates more than 55 data centers in North America, Europe and Asia. The company provides broadband, voice, video, data and managed services over a robust 250,000-route-mile U.S. fiber network and a 300,000-route-mile international transport network.

Many Wall Street analysts have liked the stock over the past year as it transforms itself from a telecom to a technology company. CenturyLink posted first-quarter earnings numbers that beat estimates, though revenues came in below expectations. Higher revenues from the acceptance and recognition of CAF phase II funds, along with strength in Business high-bandwidth data services and Consumer strategic revenues, were offset by declines in voice and long distance, low-bandwidth data services and data integration revenues.

The company reiterated the full-year free cash flow numbers of $1.8 billion to $2 billion when it last reported. That should bode well for supporting the dividend on a continuing basis.

CenturyLink investors are paid a gigantic 7.5% dividend. The consensus price objective is $29.93. The stock closed on Tuesday at $28.73 per share.

Frontier Communications

This is another RLEC that the UBS team has remained positive on. Frontier Communications Corp. (NASDAQ: FTR) offers broadband, voice, video, wireless internet data access, data security solutions, bundled offerings, specialized bundles for residential customers, small businesses and home offices and advanced business communications for medium and large businesses in 28 states. Its approximately 17,800 employees are based entirely in the United States. Wall Street analysts note that the company has taken broadband share in almost 80% of operating markets last year.

The company’s $8.5 billion acquisition of Verizon’s wireline operations that were providing services to residential, commercial and wholesale customers in California, Florida and Texas are a huge difference maker when it comes to the Merrill Lynch 2016 and 2017 estimates. The analysts increase 2016 EBITDA numbers from $2.129 billion to $3.751 billion. The 2017 EBITDA numbers go from $2.121 billion to $4.308 billion. The company is expected to report earnings in early May. The analysts also feel that company will be generating cash flow to cover the large dividend by more than two times.

The company reported a better than anticipated first quarter EBITDA number and guided in-line to ahead of Wall Street estimates on post-Verizon deal cash flow. Frontier is the highest yielding non-energy component in the S&P 500.

Frontier investors receive a huge 7.73% dividend. The consensus price objective is $6.25, and the stock closed most recently at $5.43.

Again, while not bullish on the sector itself, the UBS team does favor these stocks, and investors looking for dependable cash dividends will probably continue to do well by owning them.