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Do you prefer stocks that pay handsome dividends? For a closer look at high dividend yield stocks, we ran a screen.

We began by screening for high dividend yield stocks: those paying dividend yields above 4% and sustainable payout ratios below 50%.

We screened for stocks that appear undervalued relative to their cash flows, indicated by high ratios of levered free cash flow/enterprise value.

Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm's value from all ownership sources: market cap, outstanding debt, and preferred shares. When companies have ratios of levered free cash flow/enterprise value in excess of 10%, it may indicate that the company as a whole is being undervalued.

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

Do you think these stocks pay sustainable dividends? Use this list as a starting point for your own analysis.

1. Baldwin & Lyons Inc. (NASDAQ:BWINB): Engages in marketing and underwriting property and casualty insurance products primarily in the United States. Market cap at $353.76M, most recent closing price at $23.79. Levered free cash flow at $57.46M vs. enterprise value at $295.47M (implies a LFCF/EV ratio at 19.45%). Dividend yield at 4.2%. Payout ratio at 37%.

2. CA Technologies (NASDAQ:CA): Designs, develops, markets, delivers, licenses, and supports information technology (NYSE:IT) management software products that operate on a range of hardware platforms and operating systems. Market cap at $10.59B, most recent closing price at $23.05. Levered free cash flow at $1.09B vs. enterprise value at $9.78B (implies a LFCF/EV ratio at 11.15%). Dividend yield at 4.34%. Payout ratio at 39%.

3. Eni SpA (NYSE:E): Engages in the exploration, production, transportation, transformation, and marketing of oil and natural gas. Market cap at $90.85B, most recent closing price at $50.0. Levered free cash flow at $23.97B vs. enterprise value at $115.73B (implies a LFCF/EV ratio at 20.71%). Dividend yield at 5.36%. Payout ratio at 48.7%.

*FCF data sourced from Yahoo! Finance

Source: 3 High-Yield Stocks Undervalued By Levered Free Cash Flow