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Our previous analysis has shown that dividend stocks on average beat the market in the long term. Between 1927 and 2009, the average return of high dividend stocks was 13.04%, outperforming the market by an average of 1.36% per year. We are concerned that the Fed's expansionary monetary policy will lead to inflation in the near future. We think dividend stocks are better investment choices than long-term Treasury bonds. Legendary investors such as Marc Faber agree with us that there is a bubble in long-term Treasuries. Dividend stocks can protect investors from the potential inflation. Therefore, we have been encouraging investors to play defensively by purchasing dividend stocks.

Below we compiled a list of 8 mid-cap US companies that pay fat dividend checks and have low P/E ratios. All companies on this list have a market capitalization between $2 and $10 billion, P/E ratios lower than 10 and dividend yields of at least 5%. The market data is sourced from Finviz.

Ticker

Company

P/E

Dividend Yield

52-Week Return

APL

Atlas Pipeline Partners LP

7.37

5.76%

61.66%

ARCC

Ares Capital Corporation

9.09

8.95%

8.13%

AT

Atlantic Power Corporation

5.45

7.77%

3.35%

CIM

Chimera Investment Corporation

5.37

15.77%

-20.74%

DNP

DNP Select Income Fund Inc.

5.09

6.91%

30.22%

HTS

Hatteras Financial Corp

6.75

13.24%

9.32%

KYN

Kayne Anderson MLP Invt

9.87

6.61%

9.54%

MFA

MFA Financial, Inc.

7.55

14.39%

0.00%

Atlas Pipeline Partners LP (NYSE:APL) is the best performing stock among the 8 stocks listed above. It returned 61.66% over the past 52 weeks, versus 4.75% for the S&P 500 index over the same period. Atlas Pipeline Partners provides natural gas gathering and processing services. It has a market cap of $2B and a low P/E ratio of 7.37. It also has a relatively high dividend yield of 5.76%. There are 7 hedge funds with APL positions at the end of the third quarter last year. Leon Cooperman's Omega Advisors had $171 million invested in APL at the end of September.

DNP Select Income Fund Inc (NYSE:DNP) also generated decent returns over the past 52 weeks. It was up 30.22%, beating the market by more than 25 percentage points. DNP also has a decent dividend yield of 6.91%. DNP is a closed-end diversified management investment company. Bank of America Corp, the large shareholder of DNP, purchased 50 shares of DNP at $10.97 on December 13 and another 1500 shares at $10.98 on December 9. Director at DNP, Christian Poindexter also bought 5032 shares at $10.93 on December 7. DNP is now trading at $11.30. It has a market cap of $2.7B and a low P/E ratio of 5.09.

MFA Financial Inc (NYSE:MFA) has a double-digit dividend yield of 14.39%. The stock is trading at $6.95 per share today, same as the price it was trading at a year ago. MFA Financial is engaged in investing in residential Agency and Non-Agency mortgage-backed securities. The company reported net income of $84 million for the third quarter of 2011, up from $77 million for the same quarter a year earlier. MFA has a market cap of $2.5B and a low P/E ratio of 7.55. As of September 30, 2011, there are 15 hedge funds disclosed owning MFA. For example, Chuck Royce's Royce & Associates had $7 million invested in this stock.

Other mid-cap dividend stocks include Ares Capital Corporation (NASDAQ:ARCC), Atlantic Power Corporation (NYSE:AT), Chimera Investment Corporation (NYSE:CIM), Hatteras Financial Corp (NYSE:HTS), and Kayne Anderson MLP Investment Company (NYSE:KYN). We like dividend stocks. Their high dividend yields will deliver better returns than long-term treasury bonds. The low P/E ratios of these 8 stocks also indicate that they have great potential to provide capital gains to investors. We strongly recommend investors to do some careful research on these stocks and consider adding some of the positions to their portfolios.

Source: 8 Mid Cap Stocks For Dividend-Lovers