5 Dividend Stocks Getting Slammed

Contrarian investors should utilize times like this to differentiate between stocks that are dropping for fundamentally sound reasons -- and those stocks that are simply being dragged down because of general market concerns. Sure, there's plenty to worry about -- gigantic federal deficits, sovereign debt problems in Europe, an economic slowdown in China. But let's not forget that in the midst of all of this volatility lies the prospect to grab some great companies at dirt cheap prices.

In particular, I'm a huge fan of dividend stocks. Renowned Professor Jeremy Siegel has illustrated that from 1957 to 2003, when reinvesting dividends, the S&P's 100 highest-yielding stocks outperformed the market by an average of three percentage points. Over a long period of time, three percentage points can really add up. So if you can find dividend stocks trading cheaply, and can separate the good from the bad, you may have found yourself a real winner.

In this regular series, I run a screen for dividend stocks that have gotten crushed in the past three months, in addition to companies that are trading at low P/E's. Below is a selection of stocks that I like, additionally rated by our own 165,000-strong CAPS community.

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

The Buckle is a teen clothing and apparel retailer that has definitely felt the effects of the recession as of late. Analysts had expected Buckle to report a slight rise in revenue; however, the company's sales actually fell by 7.3% at stores that had been opened for at least one year. This helps explain why the stock has gotten hit so hard; don't expect a big uptick when it reports earnings in late August unless the company can buck the current trend and start getting consumers to buy again. Competitor Joe's Jeans (Nasdaq: JOEZ) has also been struggling as its high-priced products aren't settling well with customers -- it saw second-quarter earnings drop by 60%, even as revenues increased. Ouch!

It's not hard to see why SUPERVALU's stock has plunged by over 20% in the last three months. In July, it released its quarterly report -- and along with it came a shocking 40% drop in net income. The company said that it is still maintaining its current year guidance as it hopes that cost cutting will help it boost earnings; however, slicing overhead and firing employees can't go on forever. Compared to peers like Whole Foods and Ruddick Corporation, also national supermarket retailers, SUPERVALU is looking like the clear laggard in the group.

Ensco, along with other offshore drillers like Diamond Offshore, has been beaten up over the BP debacle. Yes, there's definitely a chance that a moratorium or future regulatory hurdles could hamper the industry, but so far, it's like Ensco is just a product of collateral damage.

While General Dynamics has been on the radar for defense contracts possibly getting squeezed by future Department of Defense budget cuts, it actually posted nice earnings this morning. Earnings rose by 5%, and the company also raised its forecast for the remainder of the year to earnings per share of $6.60-$6.65. But GD's not the only company in its space raising estimates: Competitor Textron (NYSE: TXT) also increased its year forecast after reversing last year's losses and posting a gain of $82 million for the second quarter.

GE has taken a wuppin' in the last quarter; nevertheless, in the last month, shares have shot back up by about 8%. Many investors are still scarred from GE's dividend cut in 2009 when the fate of GE Capital was as murky as a typical SEC investigation. But last Friday the company announced they were boosting their dividend by 20% and instituting an aggressive share buy-back program.

A Foolish final thought
I don't see an immediate risk of any of the companies mentioned above cutting or suspending their dividends, yet they're being priced at extremely attractive levels. This could be the perfect time to jump in the market and find that outrageous dividend stock you've been looking for.

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