You'd think that high-yield dividend stocks would do exactly what their name suggests -- net you a very tidy sum in your pocket each quarter. And often, they do. However, it's important to remember that dividend yield is a ratio, comparing dividend per share to stock price.

Because "high yield" is always only relative to the price of a stock, it may just mean that its share price has dropped. But for the value investor, this isn't necessarily a bad thing. Sometimes, stocks show high dividend returns when their prices have been knocked by overly bearish investors, creating a golden investment opportunity for value hunters.

But how do you know when a high dividend yield stock is undervalued? Options trading can be a pretty reliable indicator in this department. Call options traders are usually savvy enough to recognize when a stock is trading below its fair value.

They look for stocks expected to see significant upward momentum over the coming weeks. If they're buying call options on a high dividend yield stock, it means they think most of the bad news is already priced in, creating opportunity for near-term gains.

Here's a list of nine high-yield stocks with bullish options sentiment -- are they worth adding to your value portfolio? (Click here to access interactive tools to analyze these ideas.)

Options data sourced from Schaeffer's Research.

Company

Dividend Yield

Call Open Interest (Contracts)

Put Open Interest (Contracts)

Put/Call

Empire District Electric (NYSE: EDE)

6.14%

372

20

0.05

TransCanada (NYSE: TRP)

4.17%

1,524

158

0.10

Vectren (NYSE: VVC)

5.09%

624

65

0.10

Western Gas Partners (NYSE: WES)

4.90%

94

10

0.11

B&G Foods (NYSE: BGS)

6.00%

284

32

0.11

Sovran Self Storage (NYSE: SSS)

4.71%

315

37

0.12

Windstream (NYSE: WIN)

8.06%

29,112

3,520

0.12

Franklin Street Properties (NYSE: FSP)

5.43%

1,244

151

0.12

SCANA (NYSE: SCG)

4.57%

1,569

198

0.13

Interactive Chart: Press Play to see how the annual returns for all the stocks mentioned above have changed over the last two years.


Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.

TransCanada is a Motley Fool Global Gains pick. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.