When there’s no competition for your services, you can pretty much charge whatever you want, advertise as little as you want, and pay dividends to your investors for as long as you like.

That’s how defense contractors and refiners have operated for many years, and that’s how regional telecom players operate today, including this 10%-yielding company.

It’s able to do this because from where it operates — in rural areas of the country — there is often only one provider of telephone, high-speed Internet and cable television. The company charges more than its city-dwelling peers and also spends less on advertising. And it’s buying up rivals at a frenzied pace.

This type of operating procedure has made telecom stocks one of the best sectors for income right now. In fact, four out of five of the highest yielding stocks in the S&P 500 are telecom companies.

Windstream (NYSE: WIN) is one of those top S&P dividend payers. This $4.5 billion company has about three million customers (a third of whom are high-paying business customers) in 16 states. The company offers telephone, high-speed Internet, and high-definition digital TV services.

But isn’t the land-line telephone going the way of the dinosaur? Sort of, but not really. While the number of landlines is decreasing, they won’t disappear any time soon. Today 80% of homes in the United States still have landlines, and during the past year that number shrunk by just 3%.

At the same time, companies like Windstream are growing by selling high-speed Internet and high-definition television packages. The company added 71,700 high-speed Internet customers in the first nine months of the year, bringing its total number of subscribers just over the million mark, compared with 962,000 as of Sept. 30, 2008.

The company is also growing through acquisitions. Windstream acquired Pennsylvania-based rural phone and Internet service operator D&E Communications in November, and recently concluded its acquisition of privately held rural North Carolina carrier Lexcom, adding 223,000 access lines, 53,000 high speed Internet customers and 12,000 cable TV subscribers. Windstream expects that these acquisitions will be accretive to earnings in 2010.

The company recently announced two other acquisitions. Last month Windstream agreed to buy Iowa Telecom for $530 million and NuVox for $643 million. When completed, Windstream will see its customer base jump to 3.3 million, from the current 2.9 million, with 1.1 million broadband customers, compared to today’s 1.05 million.

In the third quarter ended Sept. 30, revenues fell -7% from the same period in 2008 to $734 million. Net income fell -4% to $0.24 per share. Windstream’s dividend payment is currently $0.25 per share quarterly, or $1.00 per year. At current prices, that gives the company a 10% yield.

Windstream issued debt for the completed acquisitions and plans to issue more debt for the upcoming ones. Total debt on the books as of Sept. 30 stood at $5.3 billion compared with total equity of just $190 million. But the company can handle the debt, as earnings before interest and taxes in the most recent quarter covered interest expenses by a factor of 2.3. Plus, no major debt is coming due until 2013.

Even with the high levels of debt, the dividend looks safe. Telecoms often have large depreciation expenses that eat into earnings, but these are a non-cash expense. Despite lower reported earnings, Windstream saw free cash flow of $185 million in the third quarter, versus dividends paid of $110 million.

This growing 10% yielder should be able to continue its dividend payments until the effects of the acquisitions boost earnings, since they are easily covered by free cash flow.

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