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This week we looked for undervalued dividend paying stocks in the Paper & Paper Products Industry, an industry which should benefit in the near term from an improved demand and reduced supply. We screened for dividend stocks with strong ROE, EPS growth -(historic and projected), low short ratios, and high options yields, among many other metrics.

We came up with these 3 stocks, which aren't the highest dividend stocks around, but they do offer attractive options yields, which are listed further down in this article.

Glatfelter (GLT): One of the world's leading manufacturers of specialty papers and fiber-based engineered paper products. Many of its items are targeted at relatively small, niche markets with a limited number of suppliers. The company serves customers in a variety of sectors, including trade book publishing, envelope and converting, food and beverage, carbonless, pressure-sensitive, digital imaging, composite laminates, and feminine hygiene. Glatfelter's papers are used for tea bags, coffee fil- ters, textbooks, metallized labels for beer bottles, postage stamps, adhesive tape, playing cards, laminate flooring, adult incontinence, and pre-moistened wipes, among other uses. Net sales in the U.S. accounted for 70% of total sales in 2009, Germany 16%, United Kingdom 11%, and other countries the remainder. (Source: Standard & Poor's)

Neenah Paper (NP): A leading international producer and distributor of premium fine papers and technical products used in filtration, tape, abrasives, and other specialty markets. Spun off from Kimberly Clark in 2008, NP now has two business segments. In 2009, the technical products business accounted for 55% of revenues and fine paper 45%. In its fine paper business, NP produces premium writing, text, cover and specialty papers, which are typically used in annual reports, corporate identity packages, invitations, personal stationery, and high-end packaging for point of purchase advertising. The technical products business is a leading producer of transportation and other filter media, durable, saturated and coated substrates used in tape, label, abrasives, filtration, medical packaging, wall covering, and image transfer markets. On a geographic basis, 63% of sales were generated in the United States and 37% came from Europe in 2009. (Source: Standard & Poor's)

Temple Inland (TIN): Following a major transformation in 2007, Temple-Inland is now focused on corrugated packaging and building products. Its corrugated packaging segment (84% of 2009 sales) makes containerboard and converts it into boxes. The building products segment (16%) produces wood products, including lumber, particleboard, medium density fiberboard, gypsum wallboard and fiberboard. The company serves over 9,000 corrugated packaging customers with 15,000 shipping destinations from its seven paper mills and 63 converting facilities. (Source: Standard & Poor's)

Here's an industry comparison for management and profitability:

The comparative ROE's and operating margins look good, but TIN's debt load is high for its capital intensive industry.

The valuations for these stocks are attractive for the coming year, (particularly next year PEG):

TIN and GLT shares have climbed back into positive ground during the past quarter.

The table below shows their share performance, ownership, market caps, and more selected valuation metrics:

GLT and NP look more undervalued than TIN on a Price/Sales, Price/Book, and Price/Free Cash Flow basis.

You can greatly improve upon the dividend yield of each of these stocks by selling covered calls and/or cash secured puts.

Here's how the Covered Call options stack up:

In addition to the static yields listed above, you also have the potential for price gains. For example, even though GLT's static yield is only 9.83%, since there's $1.83 spread between the current price and the strike price, you'd realize an additional 23% if the shares are assigned. (There are more details on these call options trades in our Covered Calls Table.)

The Cash Secured Puts for these stocks also offer attractive yields:

There are more details on these put options trades in our Cash Secured Puts Table.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 3 Consumer Goods Dividend Stocks With High Options Yields