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Historically, buying stocks with low valuations has outperformed buying the broader market. This variant on buying low and selling high makes sense as long as the market values for cheaper stocks correct themselves over time. If they do not, a value investor might be stuck holding stocks at low prices.

One way to avoid this problem is to buy value stocks which pay dividends. By paying shareholders directly, firms can compensate shareholders without relying on the equity markets. Dividends are a direct channel for stock returns that do not depend on market sentiment.

The price-to-earnings ratio (PE ratio or P/E ratio) is a very popular measure of how cheap a stock is. Five stocks are listed below that have PE ratios under 10 (they are cheap), have grown equity value over the last 10 fiscal years, and also have histories of paying handsome dividends:

Entergy Corporation (NYSE:ETR) recently traded at $71.83 per share. At this price level, the stock has a 4.6% dividend yield. For 10 out of the past 10 fiscal years, a share of ETR paid a total of $22.25 in dividends. Of these dividend payments, a total of $13.98 were paid in the last five years.

ETR shareholders have seen a 6.7% increase in share price over the past year. At present, shares of this largecap stock trade at a price-to-book ratio of 1.4, a price-to-earnings multiple of 9.1, and a price-to-sales multiple of 1.1 (trailing twelve months). Over the past decade, shareholders savored a 12.3% average annual return on equity.

Friedman Industries Inc. (NYSEMKT:FRD) recently traded at $10.76 per share. At this price level, the stock has a 4.8% dividend yield. For 10 out of the past 10 fiscal years, a share of FRD paid a total of $2.22 in dividends. Of these dividend payments, a total of $1.35 were paid in the last five years.

FRD shareholders have savored a 28.9% rise in share price over the past year. At present, shares of this microcap stock trade at a price-to-book ratio of 1.2, a price-to-earnings multiple of 8.0, and a price-to-sales multiple of 0.5 (trailing twelve months). Over the past decade, shareholders savored a 11.9% average annual return on equity.

Great Northern Iron Ore Properties (NYSE:GNI) recently traded at $108 per share. At this price level, the stock has a 12.0% dividend yield. For 10 out of the past 10 fiscal years, a share of GNI paid a total of $88.75 in dividends. Of these dividend payments, a total of $52.25 were paid in the last five years.

GNI shareholders have suffered a -17.9% drop in share price over the past year. At present, shares of this microcap stock trade at a price-to-book ratio of 13.2, a price-to-earnings multiple of 7.6, and a price-to-sales multiple of 6.5 (trailing twelve months). Over the past decade shareholders savored a 98.6% average annual return on equity.

Koss Corp. (NASDAQ:KOSS) recently traded at $5.11 per share. At this price level, the stock has a 4.6% dividend yield. For 10 out of the past 10 fiscal years, a share of KOSS paid a total of $1.48 in dividends. Of these dividend payments, a total of $0.84 were paid in the last five years.

KOSS shareholders have seen a 7.0% increase in share price over the past year. At present, shares of this nanocap stock trade at a price-to-book ratio of 2.5, a price-to-earnings multiple of 9.3, and a price-to-sales multiple of 1.0 (trailing twelve months). Over the past decade shareholders savored a 19.6% average annual return on equity.

Eli Lilly & Co. (NYSE:LLY) recently traded at $39.33 per share. At this price level, the stock has a 5.0% dividend yield. For 10 out of the past 10 fiscal years, a share of LLY paid a total of $15.74 in dividends.

LLY shareholders have savored a 17.1% change in share price over the past year. At present, shares of this largecap stock trade at a price-to-book ratio of 3.0, a price-to-earnings multiple of 9.3, and a price-to-sales multiple of 1.8 (trailing twelve months). Over the past decade shareholders savored a 25.2% average annual return on equity.

Lockheed Martin Corporation (NYSE:LMT) recently traded at $77.98 per share. At this price level, the stock has a 5.1% dividend yield. For 10 out of the past 10 fiscal years, a share of LMT paid a total of $12.95 in dividends.

LMT shareholders have savored a 16.3% change in share price over the past year. At present, shares of this largecap stock trade at a price-to-book ratio of 8.6, a price-to-earnings multiple of 9.8, and a price-to-sales multiple of 0.5 (trailing twelve months). Over the past decade shareholders savored a 30.3% average annual return on equity.

These five stocks are value plays that pay you dividends while you wait for investor sentiment to change. Waiting is hard, but being paid to wait helps a lot.

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

Disclaimer: This article was written to provide investor information and education, and should not be construed as a guarantee or investment advice. I have no idea what your individual risk, time-horizon, and tax circumstances are: please seek the personal advice of a financial planner. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing.

Source: 6 Dividend Stocks with Low P/E Ratios