TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

Investors have been struggling to separate the weak from the strong in the stock market for the past year. Instead of looking for the biggest price gains, they should seek out companies paying the biggest dividends. Here are 10 options.

TheStreet.com Ratings

TheStreet.com Ratings ranks more than 5,000 stocks based on their finances, prices and performance. Only 11% have "buy" recommendations, including the companies below.

Bargain hunters seeking upside potential and income should consider these small-cap companies before the herd piles in. Each stock has a price-to-earnings ratio that's less than 10, making them extremely cheap. By paying dividends, they provide an income stream derived from corporate profits, which are more reliable than stock appreciation.

The average price-to-earnings ratio of companies in the S&P 500 Index is about 15. It has been 22, on average, for the past five years. A price-to-earnings ratio indicates how much you would pay for each dollar of a company's earnings at its current share price.

Each stock below boasts a dividend yield, a measure of dividend payments relative to share price, higher than 5%. The average dividend yield of S&P 500 companies is 3.05%.

Some would argue these companies are cheap because investors question their ability to pay dividends and boost share value. This fear is unjustified. These companies have stronger financial positions than 89% of stocks we follow.

Check out each stock's financial-strength score, our gauge of cash position and debt management. On a scale of 1 to 10, these companies are above 5, higher than the 4.4 of the average company we cover. On that basis, it's unlikely that these companies will cut their dividends. In fact, they might boost their payouts.

10 Cheap, Dividend-Paying Stocks
Industry
Ticker
Company
Mcap (mill)
Financial Strength (out of 10)
Overall Grade
Rating
Dividend Yield
P/E
YTD Performance
Insurance
UVE
UNIVERSAL INSURANCE
175.6
8.27
B
Buy
9.39
5.35
111%
Diversified Telecommunication Services
CTL
CENTURYTEL
2968.6
7.27
B-
Buy
9.24
8.89
10%
Marine
ISH
INTL SHIPHOLDING
154.7
5.00
B+
Buy
9.21
3.73
-14%
Metals & Mining
GNI
GREAT NORTHERN IRON ORE
123.8
7.04
B-
Buy
8.51
6.25
18%
Wireless Telecommunication Services
PTNR
PARTNER COMMUNICATIONS
2572.2
5.80
B
Buy
9.23
9.42
2%
Food Products
CALM
CAL-MAINE FOODS
439.8
6.90
B
Buy
7.20
5.4
-17%
Electric Utilities
UTL
UNITIL
207.2
5.25
B-
Buy
6.88
9.13
-3%
Commercial Banks
UBSI
UNITED BANKSHARES
880.0
5.64
B-
Buy
5.63
9.84
-38%
Gas Utilities
LG
LACLEDE GROUP
660.0
6.66
B
Buy
5.07
9.8
-35%
Gas Utilities
AGL
AGL RESOURCES
2196.3
6.64
B-
Buy
5.99
8.9
-8%
SOURCE:

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