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Dividends are a great way to improve portfolio returns when volatility is making it easier to squeeze water out of a rock than getting a decent return in the markets. When looking at dividend stocks, one metric to always review is a firm’s net profit margin. Dividend stocks that can keep a healthy net margin and expand it over time should be rewarded with share price growth along with making dividends more reliable.

We ran a screen for dividend stocks that have retraced at least 20% from their 52-week highs and have strong profitability (net margin TTM>15%).

The list is ranked from lowest to highest by net margin TTM.

1. Portugal Telecom SA (NYSE:PT)

Sector

Communication Services

Industry

Telecom Services

Market Cap

$7,647M

Beta

0.76

The company offers telecommunications services in Brazil, Portugal, and Africa. The firm's net margin (TTM) is 153.83%. PT's dividend yield is 11.04%. The stock is 44.03% below its 52-week high. The short interest is N/A as of 08/15/2011.

2. Ares Capital Corporation (NASDAQ:ARCC)

Sector

Financial Services

Industry

Asset Management

Market Cap

$2,837M

Beta

2.01

The company is a private equity firm specializing in complex financing, leveraged transactions, and more. ARCC’s net margin (TTM) is 77.52%. The firm’s dividend yield is 10.12%. The stock is 23.04% below its 52-week high. The short interest is 1.70% as of 08/15/2011.

3. TC Pipelines LP (TCLP)

Sector

Energy

Industry

Oil & Gas Midstream

Market Cap

$2,182M

Beta

0.55

The company owns and operates pipelines in the U.S. The firm’s net margin (TTM) is 77.40%. TCLP’s dividend yield is 7.40%. The stock is 25.73% below its 52-week high. The short interest is 0.60% as of 08/15/2011.

4. Spectra Energy Partners, LP (NYSE:SEP)

Sector

Energy

Industry

Oil & Gas Midstream

Market Cap

$2,553M

Beta

0.10

The company transports natural gas through interstate pipeline systems and stores it as well. SEP’s Net Margin (TTM) is 75.82%. The firm’s dividend yield is 6.85%. The stock is 27.02% below its 52-week high. The short interest is 0.90% as of 08/15/2011.

5. Apollo Investment Corp (NASDAQ:AINV)

Sector

Financial Services

Industry

Asset Management

Market Cap

$1,589M

Beta

1.87

The company operates as a closed-end management investment firm and does business development. AINV’s net margin (TTM) is 70.58%. The firm’s dividend yield is 13.84%. The stock is 35.07% below its 52-week high. The short interest is N/A as of 08/15/2011.

6. KKR Financial Corporation (KFN)

Sector

Financial Services

Industry

Asset Management

Market Cap

$1,368M

Beta

N/A

The company invests while using leverage to generate competitive risk-adjusted returns in multiple asset classes. The firm’s net margin (TTM) is 68.02%. KFN’s dividend yield is 8.20%. The stock is 27.55% below its 52-week high. The short interest is 0.50% as of 08/15/2011.

7. Safe Bulkers, Inc. (NYSE:SB)

Sector

Industrials

Industry

Shipping & Ports

Market Cap

$476M

Beta

2.48

The firm’s Net Margin (TTM) is 60.13%. SB’s dividend yield is 8.94%. The stock is 31.39% below its 52-week high. The short interest is 2.40% as of 08/15/2011.

8. SL Green Realty Corporation (NYSE:SLG)

Sector

Real Estate

Industry

REIT - Office

Market Cap

$5,630M

Beta

2.59

The company is a Real Estate Investment Trust that operates in a variety of different real estate spaces. SLG’s net margin (TTM) is 59.00%. The firm’s dividend yield is 0.61%. The stock is 26.81% below its 52-week high. The short interest is 6.60% as of 08/15/2011.

9. Devon Energy Corp (NYSE:DVN)

Sector

Energy

Industry

Oil & Gas E&P

Market Cap

$26,227M

Beta

1.13

The company explores, develops, & transports oil and gas. The firm’s net margin (TTM) is 58.97%. DVN’s dividend yield is 1.03%. The stock is 32.69% below its 52-week high. The short interest is as 1.50% of 08/15/2011.

10. Buenaventura Mining Company (NYSE:BVN)

Sector

Basic Materials

Industry

Gold

Market Cap

$11,384M

Beta

0.75

The company mines and processes silver, gold, and some other metals to a smaller degree. BVN’s net margin (TTM) is 58.57%. The firm’s dividend yield is 1.05%. The stock is 21.78% below its 52-week high. The short interest is N/A as of 08/15/2011.

We hope this list helps as investors due their own due diligence on dividend stocks with strong net margins.

Source: 10 Oversold Dividend Stocks Backed By Impressive Profitability