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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:


Price-to-Earnings Ratio

Dividend Yield

Paying Dividends Since

CAPS Rating

Annaly Capital Management (NYSE: NLY  )





Telefonica (NYSE: TEF  )





Eli Lilly (NYSE: LLY  )





Exelon (NYSE: EXC  )





Merck & Co. (NYSE: MRK  )





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!

Jordan DiPietro owns shares of Exelon and Telefonica. Exelon is a Motley Fool Inside Value pick. Motley Fool Options has recommended writing puts on Exelon. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (7) | Recommend This Article (42)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 02, 2010, at 12:48 PM, pondee619 wrote:

    "Exelon, Eli Lilly, and Merck are all rated favorably by our CAPS community, with over 90% of investors expecting them to outperform the market" WHAT!?

    Your math is way off. Only one or two percent of CAPS Players (Investors?) rate any of these stocks outperform. My rating is against about 70,000 players. I've seen stories hyping over 160,000 players. Getting picked by only a thousand or two is nothing to brag about. 98% of CAPS Players (investors?) haven't rated any of these stocks. They certainly haven't picked them to outperform.

  • Report this Comment On July 02, 2010, at 2:12 PM, MizzouFanVan wrote:

    Pondee619, I believe Jordan was referring to 90% of those who had rates those stocks had picked them to outperform, not 90% of the entire CAPS community. Just my guess.

  • Report this Comment On July 02, 2010, at 2:20 PM, TMFPhillyDot wrote:


    Yes, please refer to the comment above. Sorry for the confusion, and thanks MizzouFanVan for clearing that up.

    Jordan (TMFPhillyDot)

  • Report this Comment On July 02, 2010, at 8:48 PM, loucanoe wrote:

    FWIW--I own NLY. You can't consider the dividend secure. Rising interest rates could erode their net interest margin. However, this would be partially offset by declining ammortization and could be further offset by increasing their leverate which is presently only about 6-6X but which they indicate could be increased to 8-9X. All of their assets are guaranteed by Fannie or Freddie--and it appears that is tantamount to guarantee by the US Govt--at least for now. With rising interest rates we could readily see EPS drop to the $0.50 per Q level, but that would still provide a very attractive yield. There is little real opportunity for growth in the value of the stock unless (1) investors decide the risk of holding Fannie/Freddie paper is less than presently perceived or (2) for some reason the stock goes up and they are able to sell more equity securities at a price well above book value. The only real risk over the long term is that the DC ninnies may decide not to support the decurities issued or guaranteed by Fannie and Freddie.

  • Report this Comment On July 02, 2010, at 9:45 PM, rd80 wrote:

    Transocean does not pay a dividend.

  • Report this Comment On July 06, 2010, at 11:32 AM, TMFPhillyDot wrote:


    I apologize for the confusion. RIG does not pay a regular dividend, although it has paid special cash dividends in the past. The database that we use for much research, Capital IQ, provided me with incorrect information. Again, sorry for the error.

    Jordan (TMFPhillyDot)

  • Report this Comment On July 09, 2010, at 11:25 AM, philkek wrote:

    Thanks MF and fools for this article & comments here. I like dividends and 4 or 5 star ratings. Then I check out the fundamentals that MF advises fools to do before investing any real money. Of the stocks listed here I currently have shares of 4 star MRK. I plan to do more homework before investing in others listed here. Fool on for profits.

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10/21/2016 4:01 PM
DO $17.40 Down -0.50 -2.79%
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Exelon CAPS Rating: ****
LLY $78.25 Down -0.49 -0.62%
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