Best 2011 income play: Otelco

This regional telecom stock nearly doubled the market last year and boasts a big 9% dividend.

By InvestorPlace Jan 1, 2011 11:03AM
Telephone © CorbisBy Neil George, for InvestorPlace.com

If you're looking for the best stocks for 2011, allow me to suggest my favorite regional telecom, Otelco (OTT).

This Alabama company has a stunning 9% dividend yield and on top of that almost doubled the returns of the broader market in 2010.

But why should you buy Otelco in 2011? Here are three compelling reasons:

Ringing up revenue: The key to being a successful phone company is maximizing revenue from household and business customers and keeping those customers for as long as possible. This comes not from just providing a land line dial tone but by becoming an integral part of everything the customer does with overall communications. From wireless phones to faster and better data and increasingly to providing a pipeline for video and audio entertainment -- all go far to making a growing number of customers into bigger and stickier customers. That's exactly what Otelco does and does well.

Strength in the downturn: OTT revenue has been on the ascent since the shares went public in late 2004. And even during the past few years of economic challenges -- the average for each of its core product/service lines has been ramping up at an average annual rate of over 16% -- with local services climbing by more than 38% alone.


Cost containment: As a prime example, the headquarters in Oneonta is just a quiet building without limos out front. No wonder operating margins are fat and up running currently at over 21%.


The results of these three key points is that, since coming to the market in 2004 and through all of the market, economic and industry ups and downs, OTT has given investors returns in excess of 127%, or an average annual return of over 14%.


So for the new year start out with a big dividend payer that has proved it can keep delivering on the bottom line.


Check out the other free stock picks that make up InvestorPlace.com's Top 10 Stocks for 2011.


Neil George is an investor, an investment advisor, educator, philanthropist and the editor of
Stocks That Pay You. He is also editor of By George, a long-standing financial and news advisory.

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