In a market that has been all over the place this year, from down 12% to hitting new all-time highs, the outperforming sectors have been the ones usually reserved for bad times on Wall Street. One sector that has led the pack is telecommunications, and despite the sharp rise in some of the top companies, there is every reason to believe that many of them not only had a solid second quarter but could have a strong rest of 2016.

A new and very extensive report from UBS focuses on most of the leaders in the telecom, tower and pay-TV world. We screened the list for the top stocks that continue to be rated Buy and also offer investors a tidy little dividend to help boost total return. We came up with four that look like solid picks for the rest of the year.

AT&T

After an outstanding first quarter from a stock price standpoint, this stock 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 14.3 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.

The UBS team thinks there is possible upside to current Wall Street estimates, not only for 2016 but for 2017, as well due to higher segment profitability. They also point to the company’s positive commentary on free cash flow, in addition to improving video/broadband trends later this year, with single truck-roll and new converged offerings expected to be coming in October.

AT&T investors are paid a huge 4.5% dividend. The UBS price target for the stock is $42, and the Wall Street consensus target is at $41. The stock closed most recently at $42.77 per share.

Crown Castle International

This top tower company offers incredible growth and income possibilities, and it is structured as a real estate investment trust (REIT). Crown Castle International Corp. (NYSE: CCI) provides wireless carriers with the infrastructure they need to keep people connected and businesses running. With approximately 40,000 towers and 15,000 small cell nodes supported by approximately 16,000 miles of fiber, Crown Castle is the nation’s largest provider of shared wireless infrastructure with a significant presence in the top 100 U.S. markets.

First-quarter earnings came in better than expected, while revenue was up 3.8% year over year but in line with expectations. The company said organic site rental revenues rose 8% year over year, and management increased the midpoint of the full 2016 outlook for adjusted funds from operations (AFFO) by 9% to $4.70 per share. The company also recently acquired Tower Development for $461 million in cash in a transaction that should be immediately accretive to AFFO per share.

Crown Castle’s shareholders are paid a solid 3.55% distribution. The UBS price target was lifted to $110 from $95, and the consensus target is posted at $97. The shares closed on Tuesday at $99.66.
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.

Top Wall Street analysts have liked like the stock over the past year as the company transforms itself from a telecom to a technology company. While some have worried over CenturyLink maintaining the dividend, the UBS team is positive on the comparisons for the second half of the year and sequential revenue stability. They also cite an update on the data center sale progress and the potential for stock buybacks as additional positives.

CenturyLink investors are paid a gigantic 7.08% dividend. The $36 UBS price target for the stock is well above the consensus estimate of $29.57. The stock closed trading on Tuesday at $30.49.

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 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 and synergies which the analysts feel will be positive. Frontier is the highest yielding non-energy component in the S&P 500.

The UBS team also expect the company to maintain its 2016 free-cash-flow estimates, which implies and attractive dividend payout level of 50% and free cash flow of 15%.

Frontier investors receive a huge 8.37% dividend. UBS has a strong $7 price target, while the consensus target is lower at $6.07. Shares closed Tuesday at $5.02.

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We focused on the top dividend-paying stocks in the UBS list, and all of them make good additions to growth and income portfolios. Investors may want to buy partial positions in front of the upcoming earnings reports.

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