Some of the small regional telephone companies might not be glamorous, but they're generating nice cash flows. Citizen Communications (CZN) offers investors an 8.9% yield while Qwest Communications (Q) has a 7.9% yield. Of course, competition from cable companies and wireless providers is the threat that can't be ignored in this sector.

8.7%

Citizens Communications (CZN) was upgraded from Neutral to Outperform at Credit Suisse. $12.50 price target. With rural local exchange carriers (RLECs) underperforming the market and the spread widening with the Credit Suisse High Yield Index there is potential upside as the spread should come back within historical norms.

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Buy-- Price 10.94 on Feb. 19
by Hilliard Lyons

CZN's 9.1% dividend yield [makes it] one of the five highest-yielding stocks in the Standard & Poor's 500... . The stock has declined by 32% from its 52-week high ... yet fundamentals [haven't] materially changed. CZN typically has an [earnings before interest, depreciation, taxes and amortization] margin in the mid-50% range, [quite high among] rural local-exchange carriers... . We expect "08 [free cash flow] of $500 million. 13 target. Market-cap: $3.7 billion.

8.1%

DIVIDEN

Div. 8%

"One top investor thinks the stock should trade at 15-16 a share, or nearly 27% above its current level. That, along with the hefty dividend, would mean a total return of 35%."

Have lost money on it and now it is cutting dividend