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Do you prefer stocks that pay part of their return in dividend income? If so, here's a list you might be interested in.

We ran a screen on stocks with market caps just above $300 million paying dividend yields above 1%. We then screened for those that still appear undervalued, with PEG below 1 and P/FCF below 15.

Then we screened for bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers, which often have more sophisticated market data on hand than Main Street investors, expect these names to outperform.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Do you think these hedge funds are calling it right on these names? Use this list as a starting point for your own analysis.

1. Peabody Energy Corp. (NYSE:BTU): Engages in the exploration, mining, and production of coal. Market cap at $6.97B, most recent closing price at $25.98. Net institutional purchases in the current quarter at 23.2M shares, which represents about 8.68% of the company's float of 267.26M shares. As of September 30th, 2012, the top 2 holders of the stock are JP Morgan Chase (6.14%), and The Vanguard Group (5.8%).

Dividend yield at 1.34%. PEG at 0.58, and Price/Free Cash flow at 11.04.

3. Cooper Tire & Rubber Co. (NYSE:CTB): Together with its subsidiaries, manufactures and markets replacement tires in North America and internationally. Market cap at $1.56B, most recent closing price at $24.84. Net institutional purchases in the current quarter at 3.4M shares, which represents about 5.81% of the company's float of 58.52M shares. As of September 30th, 2012, the top 2 holders of the stock are The Vanguard Group (5.56), and National Rural Electric Cooperative Association (4.5%)

Dividend yield at 1.7%. PEG at 0.67, and Price/Free Cash Flow at 5.39.

4. Kimball International, Inc. (KBALB): Manufactures and sells electronic assemblies and furniture in the United States and internationally. Market cap at $442.11M, most recent closing price at $11.61. Net institutional purchases in the current quarter at 2.4M shares, which represents about 8.36% of the company's float of 28.70M shares. As of September 30th, 2012, the top 2 holders of the stock are Dimensional Fund (7.9%), and Black Rock (5.5%)

Dividend yield at 1.76%. PEG at 0.93, and Price/Free Cash Flow at 10.25.

5. Kohlberg Kravis Roberts & Co. (NYSE:KKR): A private equity and venture capital firm specializing in acquisitions, leveraged buyouts, management buyouts, and mezzanine investments in large cap companies. Market cap at $3.57B, most recent closing price at $14.64. Net institutional purchases in the current quarter at 21.5M shares, which represents about 9.89% of the company's float of 217.44M shares. As of September 30th, 2012, the top 2 holders of the stock are Lexington Partners VI Holdings (8%), and Morgan Stanley (7%).

Dividend yield at 5.71%. PEG at 0.15, and Price/Free Cash Flow at 1.03.

Institutional data sourced from Fidelity, all other data sourced from Finviz.

Source: 4 Undervalued Dividend Stocks Being Bought By Hedge Funds