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6 Large-Cap Undervalued Stocks With High Dividend Yields

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Insider Monkey) -- We have been urging investors to focus on high dividend stocks for the past year. The problem is, most people don't know how to time the market. Dividend-yielding stocks are valued like any other stocks, and, like other investments, when they are undervalued is the best time to buy. We used price-to-book and price-to-earnings ratios to pick the most undervalued stocks.

Here is a list of high-dividend yielding stocks (at least 7% dividend yield) that have P/B ratios less than 1.2 and forward P/E ratios of 10 or less. Most of these stocks are foreign stocks which shouldn't be very surprising. We think the crisis in Europe is overblown and both European banks and telecom stocks are undervalued right now. We know that most dividend investors are conservative investors but we believe this is a great time to at least initiate a small diversified position in the European stocks that nobody wants to own.

1. France Telecom (FTE) is a mobile operator which provides internet access and telecommunications services in Europe. The company has a market cap of nearly $40 billion. The stock offers a dividend yield of 13%. It's currently trading with a forward P/E of 8.35 and a P/B ratio of 1.1. FTE lost 17% last year. France Telecom isn't a popular stock among the 350+ hedge funds we are tracking. The only hedge fund with a position in FTE was Two Sigma Advisors.

2. Annaly Capital Management (NLY - Get Report) manages a range of real estate related investments. The company has a market cap of $16 billion, a dividend yield of 13.8%, a forward P/E of 7.22, and a P/B of 1.01. NLY returned in line with the market during 2011, returning 2.5%. Many hedge funds were buying NLY last year. Bill Miller's Legg Mason Capital Management had more than 7 million shares of NLY during Q3. Some famous hedge fund managers also invested in NLY include D. E. Shaw and Cliff Asness.

3. Banco Santander (STD) offers a range of financial products to European countries, Latin American countries and the United States. It has a market cap of $66 billion and a dividend yield of 11.12%. It trades with a forward P/E of 4.83 and a P/B of 0.63. The stock lost 23% in 2011. Ken Fisher was a huge fan of STD last year; he had nearly 29 million shares of STD at the end of September. Jim Simons and Bruce Berkowitz picked STD during the third quarter, each initiating a new position.

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