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Despite uncertainty regarding the economic challenges in some European countries, savvy investors can still find extraordinarily cheap companies with high dividend yields in Europe. Investors tend to be overly optimistic and pessimistic at times. Right now, Spain, Italy and Portugal are thrown under the bus regardless of the differences in their economies and positive evaluations in IMF reports just a few years ago. Instead of giving in to negative emotions and extrapolating bad news into a scenario of calamity, investors should be more critical about the negativity in the market that makes a lot of noise but adds little value to investment decision making. Below, I highlight three stocks, which I would consider to buy and hold long-term. The dividend yield for Telefonica (NYSE:TEF) and France Telecom (FTE) is above 10%. Considering, just for the sake of argument, absolute inactivity in the portfolio, investors can reap very decent long-term yields as they profit from compounding. If the investor contributes $10.000 to TEF or FTE today, this position could be worth $175.000 in 30 years (assuming 10% consistent dividend yield and reinvestment of dividends). All of these stocks have in common that their valuation level is quite low and are offering very lucrative dividend yields. Considering that the entire telecommunications industry is lowly priced, these companies provide a very attractive risk-reward trade-off.

TEF is Spain's largest telecommunications company with revenue of $85bn and an operating margin of 18%. It ranks second in market capitalization just behind Banco Santander (STD). Telefonica has strong exposure to the Latin American markets with EBIT and cashflow being driven by a more dynamic economic area going forward. TEF's home market is saturated, which makes a dominant emerging market presence attractive. On the negative side, TEF has high levels of debt outstanding, which I assume can be rolled over. However, as TEF only trades at the lower end of its 52-week range of between $14.00-$25.31, it marks an interesting entry point for the contrarian. In addition, it has a P/E of just under 9 and a dividend yield of 11.2%

FTE is a French telecommunications company and the third-largest in Europe with close to 200 million customers. FTE has $60bn in revenue and an operating margin of 17%. FTE focuses on emerging markets, primarily in the Middle East and Africa, to achieve growth in revenue and sales. In contrast to TEF, FTE's home market is a comparatively strong market, with French public finances more under control, which adds more stability to FTE and to its dividend. FTE trades about 35% below its 52-week high, has a P/E of 7 and a dividend yield of 13%.

Portugal Telecom (NYSE:PT) is a globally operating telecommunications company with a strong focus on emerging markets in Brazil and Africa. Like TEF, PT has to deal with a largely saturated European home market and a more challenging economic climate with worries about debt levels and corresponding higher financing costs. I believe PT will be able to mitigate these effects primarily by focusing on high-growth countries to expand sales and earnings. EBIT and free cash flow contributions from Portugal are likely to decline. PT had sales of $8bn and an operating margin of 13%, which is inferior to its peer group. PT trades at just 6 times forward earnings and exhibits a 6% dividend yield. Given its low valuation and its growth prospects in Brazil, PT could do actually very well in a more normalized environment that focuses on fundamentals rather than sentiment.

Source: 3 Conservative Stocks That Could Make You Rich