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Finding a good stock is one thing – and an entirely subjective thing, at that. Every investor has different levels of risk he or she is comfortable with. But, there are a few things that most investors agree on – price-to-earnings ratio (P/E Ratio) and dividend yield.

A company’s P/E Ratio gives investors an idea whether the stock is overpriced while the dividend yield pays investors to wait. Investors can choose when they purchase a dividend-yielding stock whether to take the dividends as they are paid or roll them back into the investment, offsetting losses (or at least hopefully so). The only catch is that stocks with a low P/E Ratio can be priced low for a reason and a high dividend can point to trouble – after all, dividends are not guaranteed. So, to make sure an investment is a decent one, looking to the people “in the know” is a good way to go. Hedge fund managers fit this bill. Not only do they spend their lives focused on trading, but they employ teams of dozens of analysts that continually analyze the market. Here is a list of high dividend stocks with a low P/E ratio that hedge fund managers are buying.

Ticker

Company

P/E

Dividend Yield

Payout Ratio

AGNC

American Capital Agency Corp.

4.18

19.94%

94.81%

ARCC

Ares Capital Corporation

8.73

9.32%

79.96%

AT

Atlantic Power Corporation

5.38

7.87%

18.75%

CIM

Chimera Investment Corporation

4.83

17.53%

110.74%

HTS

Hatteras Financial Corp

6.54

13.65%

98.60%

MFA

MFA Financial, Inc.

7.30

14.88%

109.98%

NLY

Annaly Capital Management, Inc.

8.31

14.29%

147.29%

American Capital Agency Corp. (NASDAQ:AGNC) is a residential real-estate investment trust (REIT). It had a $5.16B market cap and a 0.45 beta, meaning it is roughly half as volatile than the market at large. AGNC is trading at $28.08 a share, or 4.18 times its earnings, and pays a 19.94% dividend yield on a 94.81% payout ratio. The stock returned 18.78% in 2011. Brian Jackelow’s SAB Capital Management had $110.01 million in the company at the end of September after increasing its holding in the company by +17% during the third quarter. John Griffin’s Blue Ridge Capital, Bill Miller’s Legg Mason Capital Management and Ken Griffin’s Citadel Investment Group also hold positions in AGNC.

Ares Capital Corporation (NASDAQ:ARCC) is a diversified investment company. It has a $3.17B market cap and a beta of 1.80, meaning it is more risky than the market. ARCC is trading at $15.45 a share, or 8.73 times its earnings, and pays a 9.32% dividend yield on a 79.96% payout ratio. The stock returned -0.06% in 2011. Charles Clough’s Clough Capital Partners had $41.73 million invested in the stock at the end of September after increasing its position in the company by +64% during the third quarter. Richard Driehaus’ Driehaus Capital and Bill Miller’s Legg Mason Capital Management are also fans of the company.

Atlantic Power Corporation (NYSE:AT) is an electric utilities company. It had a $4.93B market cap and a 0.77 beta, meaning it is roughly 25% less volatile than the market at large. AT is trading at $14.30 a share, or 5.38 times its earnings, and pays a 7.87% dividend yield on a 18.75% payout ratio. The stock returned 4.46% in 2011. Both Jim Simons’ Renaissance Technologies and D. E. Shaw’s D E Shaw increased their positions in AT by over 50% in the third quarter.

Chimera Investment Corporation (NYSE:CIM) is a diversified REIT. It had a $2.58B market cap and a 1.24 beta, meaning it is about 25% more volatile than the market at large. CIM is trading at $2.51 a share, or 4.83 times its earnings, and pays a 17.53% dividend yield on a 110.74% payout ratio. The stock returned -29.10% in 2011. Howard Guberman’s Gruss Asset Management initiated a new $10.77 million position in CIM during the third quarter, a holding worth roughly 1.5% of its portfolio. David Costen Haley’s HBK Investments and Ken Griffin’s Citadel Investment Group are also fans of CIM.

Hatteras Financial Corp (NYSE:HTS) is a residential REIT. It had a $2.02B market cap and a 0.26 beta, meaning it is roughly one-quarter as volatile than the market at large. HTS is trading at $26.37 a share, or 6.54 times its earnings, and pays a 13.65% dividend yield on a 98.60% payout ratio. The stock returned 0.11% in 2011. Charles Clough’s Clough Capital Partners had $39.49 million in HTS at the end of the third quarter. Cliff Asness’ AQR Capital Management also has a position in HTS.

MFA Financial, Inc. (NYSE:MFA) is a diversified REIT. It had a $2.39B market cap and a 0.32 beta, meaning it is about one-third as volatile than the market at large. MFA is trading at $6.72 a share, or 7.30 times its earnings, and pays a 14.88% dividend yield on a 109.98% payout ratio. The stock returned -4.82% in 2011. MFA is a favorite of Chuck Royce’s Royce & Associates, Cliff Asness’ AQR Capital Management and Charles Clough’s Clough Capital Partners.

Annaly Capital Management, Inc. (NYSE:NLY) is a diversified REIT. It had a $5.16B market cap and a 0.30 beta, meaning it is 30% as volatile than the market at large. NLY is trading at $15.96 a share, or 8.31 times its earnings, and pays a 14.29% dividend yield on a 147.29% payout ratio. The stock returned 2.70% in 2011. Bill Miller’s Legg Mason Capital Management had $116.86 million in NLY at the end of September after increasing its holding in the company by +91% in the third quarter.

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

Source: High Dividend Stocks With Low P/E Ratios