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We have found five dividend stocks that have "safe" dividends (all have a payout ratio of less than 60%), but are also undervalued -- having a PEG of less than 2.0. Although the dividend yields range from 2% to 3%, they all have been growing their dividend payments by at least 20% annually over the last five years.

Dividends can be a big part of portfolios during low interest rate environments and we have a special appreciation for dividend-paying stocks, but what makes these stocks even greater is the expectation that the dividend payments should continue to move higher and the realization of the stock's under-pricing will lead to a higher stock price.

  • Quest Diagnostics Inc (NYSE:DGX) pays a 2.1% dividend yield, with the lowest dividend payout of the five stocks at 20%. The company has grown its dividend payment by 25% annually over the last five years and is relatively cheap with a 1.3 PEG.

Quest Diagnostics is one of the largest providers of commercial laboratory services in North America. The company was formerly part of Corning, being its laboratory testing business, but spun off in 1996. After a number of acquisitions and growth the company now provides lab testing services to physicians, hospitals, managed care organizations, employers, government institutions, and other independent clinical laboratories.

The company also underwent restructuring in late 2012, which is expected to increase operational efficiency and restore growth. Most notably, this will change the company's business structure by creating two new business groups, diagnostic information services and diagnostic solutions. These changes will eliminate three management layers and 400 to 600 management positions by the end of 2013, leading to an annualized savings of $65 million.

Quest also had some $295 million in cash at the end of 2012, up from $165 million on a year-over-year basis. As far as fourth-quarter 2012 cash generation, the company generated cash from operations of $380 million, while repurchasing $50 million of shares, paying our $110 in dividends and reducing outstanding debt by $147 million.

  • Target Corporation (NYSE:TGT) has a 1.3 PEG, with a 2.1% dividend yield and only a 24% payout ratio. Also, the retailer has grown its dividend 20% annually over the last five years.

Target is one of the major retailers competing head to head with Wal-Mart. The company's long-term plans is to differentiate itself, which management believes will allow the retailer to reach $100 billion or more in sales and $8.00 or more in earnings per share by 2017.

Going forward, Target hopes to undergo store renovations in an effort to promote store productivity and increase sales. A few of these improvements includes expanding their grocery offering and remodeling 100 locations in 2013. As far as future guidance, Target upped EPS expectations to $4.85 and $5.05 per share for fiscal 2013, compared to the previous expectations of $4.70 to $4.90. The company also recently hiked its annual dividend by 20% to $1.44, and expects it to increase to $3.00 per share or more by 2017 (see how Target stacks up against Wall-Mart).

  • Coca-Cola Enterprises Inc (NYSE:CCE) is another great dividend grower, having grown its dividend payment 27% annually over the last five years and yields 2.2%. The PEG ratio is at 1.5 and the dividend is only a 45% payout of earnings.

Coca-Cola Enterprises focuses on production and distribution of non-alcoholic beverages in Western Europe. The company distributes one of the world's most recognized brands, Coca-Cola. The nonalcoholic ready-to-drink, category is one of the largest fast-moving consumer goods category in Western Europe, with Coca-Cola Enterprises owning 20% of the market (volume).

The company is already one of the largest Coca-Cola bottlers in the world, and happens to be the only licensed bottler for Coca-Cola products in Belgium, France, Great Britain, Luxembourg, Monaco, and the Netherlands. It now hopes to diversify its product portfolio beyond its stable cola brand, which should help drive future growth.

As far as its future dividend outlook, the company plans to increase its dividend by at least 15% above current annualized levels for 2013, which will mark the sixth consecutive year of dividend increases. Coca-Cola Enterprises was also one of billionaire Daniel Och's new additions to his portfolio last quarter (see all five).

  • St. Jude Medical, Inc. (NYSE:STJ) has a 2.4% dividend yield and has grown its dividend payment at the highest rate of the five stocks at 86% annually over the last five years. The payout ratio is 60% and its PEG is 1.8.

St. Jude is a designer and manufacturer of medical devices that treat cardiovascular and neurological conditions. A big part of what drives the company is its research and development efforts, where the company has notable pending products that includes an imaging system that emits a lower dose of radiation than conventional devices.

The long-term revenue growth should be led by its cardiovascular products portfolio, which is expected to boost sales over $2 billion annually. The company's $1 billion acquisition of AGA Medical back in 2010 was instrumental in strengthening its cardiovascular franchise.

  • Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has the highest dividend yield at 2.6% and a solid payout ratio of 34%. The casual dining company's PEG is 1.6 and it has grown its dividend 23% annually over the last five years.

Cracker Barrel operates a number of Cracker Barrel Old Country Store restaurant and retail concepts. The format of these stores includes a rustic old country design. The key for the restaurant is industry tailwinds, which includes a strengthening U.S. economy.

S&P expects the full-service restaurant industry comp sales to grow at 1% to 2% over the next year. What's more is that customer traffic is expected to be up 0.5% in 2013. Recent news for Cracker Barrel shows that takeover activist Biglari Holdings might be looking to increase its stake in the company to over 20%. The restaurant has taken counter measures, flooding the market with shares to prevent the activist from raising its stake (read more about Biglari's takeover attempt). Earlier this month Cracker Barrel saw a reiteration from Argus Research and calls for a $88 price target for year end.

These five stocks all appear to be under-priced on a PEG basis, but also have a strong history of dividend increases. Most of the stocks are relatively unknown and have little coverage, which only exacerbates the fact that they could be cheap.

Source: 5 Cheap Dividend Stocks Worth Investigating