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 3 percentage points. Over a long period of time, 3 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/Es. Below are the top seven dividend-paying telecom stocks (above 1%) that have gotten beaten down the most, in order, additionally rated by our own 170,000-strong CAPS community.

Company

Dividend Yield

13-Week Price Change

P/E Ratio

CAPS Rating
(out of 5)

Atlantic Tele-Network (Nasdaq: ATNI)

2.3%

(23.5%)

15.0

***

Telefonica (NYSE: TEF)

6.6%

(20.0%)

8.1

****

France Telecom (NYSE: FTE)

6.3%

(11.8%)

12.5

****

Philipine Long Distance (NYSE: PHI)

6.2%

(9.3%)

15.3

****

Turkcell Iletisim (NYSE: TKC)

3.4%

(9.0%)

14.0

****

Tellabs (Nasdaq: TLAB)

1.1%

(7.3%)

11.9

****

China Mobile (NYSE: CHL)

3.3%

(6.8%)

12.0

*****


Source: Motley Fool CAPS. Data current as of Jan. 12.

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. It's no surprise that many of these companies are European, and thanks to the sovereign debt crisis and lower growth expectations, they are certainly taking a hit. It's something important to consider, because trouble in the eurozone obviously affects each individual country. However, this could also be the perfect time to jump in the market and find that outrageous dividend stock you've been looking for. With the stock market looking up and investors looking for different ways to generate income, dividend-paying stocks such as these could have the potential to give you exactly what you're looking for.

Interested in what our Motley Fool analysts think are the best stocks for 2011? Click here to read the free article!

Jordan DiPietro owns shares of Telefonica. China Mobile is a Motley Fool Global Gains pick. France Telecom, Philippine Long Distance Telephone, and Turkcell Iletisim Hizmetleri AS are Motley Fool Income Investor recommendations. The Fool owns shares of China Mobile, and Telefonica. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.