5 Cheap Stocks Paying Cold, Hard Cash

Editor's note: We've removed two of the stocks originally posted in this article because of incorrect data given to The Motley Fool. We've updated the tables to display correct data as of July 12, 2010. The Fool regrets the error.

With the broad market down about 13% over the past three months, and concerns over Europe's debt crisis, China's slowing economy, and the BP spill still in the forefront of news, investors have every right to be concerned.

But the silver lining is that many quality stocks are being dragged down with the market, and this could mean great opportunities for savvy investors.

I ran a screen for companies paying dividends above 3% that have been dishing out cash for more than 10 years, that are trading for P/Es below 10, and that have CAPS ratings of at least three stars as rated by our 165,000-strong investing community. Below are five stocks that fit that criteria:

Sources: Capital IQ, Yahoo! Finance, and Dividend Investor, as of July 12, 2010.

Granted, there are probably good reasons why some of these stocks are trading so cheaply. 

Telefonica, the Spanish telecom giant, has been punished for operating in its home country, Spain, as worries about sovereign debt have crippled the country as of late. However, it's worth noting that Telefonica has a significant presence in Latin America, and it does business in Eastern Europe as well. Since it's paying such a hefty dividend and trading at such a great price, personally, I like this company as a contrarian dividend play.

Exelon, Eli Lilly, and Merck are all rated favorably by our CAPS community, with more than 90% of the investors who rated them expecting them to outperform the market. These are solid companies that have been paying dividends for a long time. Trading at these prices, I'd say they're worth looking into further.

What do Fools think about the dividend stocks listed above -- any clear winners in the pack? Sound off in the comments box below!