3 High-Paying Dividend Stocks on Sale

NEW YORK ( TheStreet) -- Don't you just love dividend-paying stocks? You buy one and like magic they start sending you thank-you notes in the form of dividend payments.

Non-dividend stocks never send you thank-you letters. You may receive a letter from a class-action lawyer once in a while trying to shake down the company for a few dollars, but that's usually about it.

The only thing better than buying a high-yielding stock is buying a high-yielding stock on sale. The market is a fantastic place to find sales. We have to be extra careful buying stocks on sale, though. There's usually a reason people are selling but if you're willing to wait and be selective, fantastic deals abound.

POT Dividend Yield Chart POT Dividend Yield data by YCharts

Potash ( POT)

Background: Potash Corporation of Saskatchewan, together with its subsidiaries, produces and sells fertilizers and related industrial and feed products primarily in the United States and Canada.

I could certainly have fun with this name, especially after writing "Why Weed Isn't Legal and May Never Be", but I will stick to the investment thesis.

Potash gapped lower the last day of trading in July after a Russian producer ended its distribution contract with Belarus. Belarus is the biggest player in the global potash space, and effectively controlled the market the way De Beers (the good folks who brought us "A diamond is forever") controls the diamond market.

Instead of $800 of more per ton for potash, the fertilizer is worth about half that now. Lower prices result in lower profits for Potash.

The good news for you is the dust settled and the market fully priced in the price change. Also, that's one less risk hanging over investors' heads that is now effectively removed.

Earnings Payout Percentage: 33%

After the sell-off, the yield jumped to 4.7%, bringing it to my attention. I waited until the shares found support, and now it's relatively safe to stick your big toe in the water.

The average analyst target price for Potash is $37.93. Don't let a downgrade and/or lower price target announcement alarm you. A $3 or $4 price target reduction should have near zero impact based on the already-discounted shares.

The last reported short interest is paltry and without reason to consider it a meaningful influence at only 2% of the average trading float.

POT Payout Ratio TTM Chart POT Payout Ratio TTM data by YCharts

ABX Dividend Yield Chart ABX Dividend Yield data by YCharts

Barrick Gold ( ABX)

Background: Barrick Gold engages in the production and sale of gold and copper. The company has a portfolio of 27 operating mines worldwide. It also holds interests in oil and gas properties located in Canada.

Price To Book: 1.2

Earnings Payout Percentage: 40%

I have a lot of gold stocks popping up on my scanners lately. When an entire industry is declining, "value buys" are everywhere, only they're nowhere. The difference between catching a falling knife and a value buy is how close you come to the bottom when you enter.

If you buy too soon you can get stopped out, only to watch the stock recover and reward those who waited for a better deal. Wait too long and you can wind up trying to chase it higher, never a pleasant thing.

Barrick probably isn't at the exact bottom here, but in relative terms is worth looking at. I'm not a enormous fan of gold at the current price relative to inflation, but gold needs to fall another 20% before I consider the dividend to be at risk.

The average analyst target price for Barrick Gold is $22.68. Unlike most stock picks, I don't suggest pushing for more than the analyst target price. I think the correct play is to hold out for $14.90 a share, and use $19.80 as a target profit target. Dividends received while waiting are icing on the cake.

ABX Payout Ratio TTM Chart ABX Payout Ratio TTM data by YCharts

MO Dividend Yield Chart MO Dividend Yield data by YCharts

Altria Group ( MO)

Background: Altria manufactures cigarettes, smokeless products and wine in the United States and internationally. It offers cigarettes primarily under the Marlboro brand; smokeless tobacco products under the Copenhagen, Skoal, Red Seal, Husky, and Marlboro Snus brand names; cigars principally under the Black & Mild brand; and pipe tobacco.

I don't enjoy the smell of smoke, but I also don't feel we need all the laws we have either. One thing Big Tobacco has going for it is a low risk of government lawsuits. It turns out smokers don't cost states money after factoring in savings from lower expenses from the lower life expectancy. Cold I know, but my job isn't to make moral judgments on the companies; rather, my role is to determine the profitability, risks and potential viability of the investment.

While Big Tobacco doesn't face as much domestic risk as previously thought of, world-wide risk is a giant unknown. Regulatory and civil risks are offset with changes in nicotine delivery. Electronic cigarettes, cigars and pipes are making inroads and have the potential to halt the decline in customer base.

In theory, one could make an argument that electronic smoking products could increase revenue and grow the customer base. That's more optimistic than I suggest you model for, and if it happens it's a bonus.

Price To Book: 19.9

Earnings Payout Percentage: 55%

Altria investors are receiving a yield of 5%, and that's not quite enough. Hold out for a sub-$35 price because you probably can get it. An overall market drop alone should get us there. Look to enter around $34.90ish.

The average analyst target price for Altria Group is $37.50, and I believe $39 is reasonable within the next 12 months.

Almost zero desire by short-sellers to move against this stock. Short interest hardly moves the needle with only 0.9% of the float.

MO Payout Ratio TTM Chart MO Payout Ratio TTM data by YCharts

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Robert Weinstein is an active trader focusing on the psychological importance of risk mitigation, emotion and financial behavior of market participants. Robert co-founded the investing blog StockSaints, where he writes a journal about his trading activity and experiences.

In addition to TheStreet, Robert also contributes to Real Money Pro, providing real-time trading ideas for stocks, options and futures.

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