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The Gist

These five stocks are from S&P 500 U.S. companies with market caps of 2 billion or better which pay dividends yielding 7% on average. What's more, most of these stocks have great stories, positive catalysts for future growth.

Most of these stocks have recent upgrades and positive analyst comments. Some have recent negative comments or their earnings results and are down significantly presenting buying opportunities. There may be more volatility in front of us with year-end tax loss selling kicking in, yet this may be the catalyst that provides a good entry point to start a position in these high-yield dividend-paying opportunities.

I posit an ideal investing approach for the next four years is to construct a diverse portfolio of stocks with significant capital gain potential and high dividend yields with the potential to generate money throughout the year. One reason to invest in dividend-paying stocks is they may be the investment of choice to fund the retirement of many Baby Boomers. This may create demand for stocks like the ones covered in this article.

These dividend-paying stocks have the potential for both capital gains and income production. Boomers will be looking for stocks that have a track record of increasing dividends. This will give them yet another hedge against inflation. This combination of capital gains and income production will be necessary to fund the lengthening retirement that comes with a greater life expectancy.

The Goods

In the following sections, we will perform a review of the fundamental and technical state of each company to determine if this is the right time to start a position. The following table depicts summary statistics and Friday's performance for the stocks.

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CenturyLink, Inc. (CTL)

CenturyLink pays a dividend with a yield of 7.34%. The company is trading 9% below its 52-week high and has 14% upside potential based on the consensus mean target price of $44.59 for the company. CenturyLink was trading Friday for $38.87, down nearly 1% for the day.

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Fundamentally, CenturyLink has some positives. CenturyLink's forward P/E ratio is 15.63 and the company is trading at 1.2 times book value. The company's revenue growth has surpassed the industry average of 7.4%. Profits and revenues are up and the company has raised guidance.

Technically, CenturyLink seems to be consolidating just above the 200-day sma after a precipitous drop. In my last article on the stock I recommended waiting to start a position until the stock pulled back to the 200 day sma. That is essentially what has happened.

CenturyLink shares rose Thursday after posting better than expected third quarter net income and raising its profit guidance for the full year. I posit the stock will continue to rise based on improving guidance and fundamentals. I believe you are safe starting a position at this level.

Altria Group Inc. (MO)

Altria pays a dividend with a yield of 5.63%. The company is trading 12% below its 52-week high and has 14% upside potential based on the consensus mean target price of $36.05 for the company. Altria was trading Friday for $31.38, up slightly for the day.

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Fundamentally, Altria has some positives. The company has a forward P/E of 13.20. The company has a net profit margin of 15.98% and an ROE of 94.15%.

Technically, Altria has been in a multi-year uptrend since 2005. The stock recently pulled back to the bottom of its current trading range. Altria is trading 2% below its 200-day sma.

I see the recent pullback as an excellent opportunity to start a position in the name. Friday's stock action seems to indicate that there is some bottom fishing being done on the stock at this level. I posit the stock is a buy here, but wait for a trend reversal and the stock to break above the 200-day for confirmation of a bottom if you wish to reduce downside risk.

Pitney Bowes Inc. (PBI)

PBI pays a dividend with a yield of 12.48%. The company is trading 35% below its 52-week high and has 30% upside potential based on the consensus mean target price of $15.50 for the company. PBI was trading Friday for $11.94, down 1% for the day.

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PBI has some fundamental positives. The company is trading for 48% of sales and has a forward P/E of 6.36. The company's net profit margin is 8.78%. According to Finviz.com, the company has a ROE of 935%. The company is increasing profit margins and cash flow from operations is healthy.

Technically, PBI has been trading sideways since May and just took another nose dive after missing earnings estimates on November 1st. The stock is technically weak and in a downtrend at this time.

PBI reported third quarter 2012 earnings per share of 38 cents, lower than the Street's expectations. EPS was down significantly year over year. This caused the stock to crater. I see this as a buying opportunity. Cash flow and net income have been trending up for the last few years. The cash flow seems adequate to cover the dividend. The only threat is a series of debts that will be maturing over the next several years. Look for a trend reversal prior to starting a position in the stock.

AT&T, Inc. (T)

AT&T pays a dividend with a yield of 5.3%. The company is trading 12% below its 52-week high and has 9% upside potential based on the consensus mean target price of $36.59 for the company. AT&T was trading Friday for $33.49, up nearly 1% for the day.

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Fundamentally, AT&T has some positives. The company has a forward P/E of 12.82. The company has a net profit margin of 3.68%. The company is trading for slightly less than two times book value and 27 times free cash flow.

Technically, AT&T has just fulfilled a double top reversal pattern which is bearish. The stock has fallen to just above the 200-day sma support line.

I see the recent pullback as an excellent opportunity to start a position in the name. Friday's stock action seems to indicate that there is some bottom fishing being done on the stock at this level. The company just came out with some inspiring news as well. AT&T CFO John Stephens, referring to the latest iPhone said:

"Supply was challenged in the third quarter, and quite frankly, the supply situation has improved, and we expect it to continue to improve."

I like the stock going into the gift giving season. I posit the stock is a buy here.

Verizon Communications Inc. (VZ)

Verizon pays a dividend with a yield of 4.83%. The company is trading 12% below its 52-week high and has 9% upside potential based on the consensus mean target price of $46.41 for the company. Verizon was trading Friday for $42.68, up slightly for the day.

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Fundamentally, Verizon has some positives. The company has a forward P/E of 14.90. The company has a net profit margin of 10.74%. The company is trading for slightly over three times book value and 14 times free cash flow.

Technically, Verizon has just broken through support at the bottom of the uptrend channel. This is bearish. The stock has fallen to 3.5% above the 200-day sma support line.

I see the recent pullback as an excellent opportunity to start a position in the name. The stock is more richly valued than the rest of the stocks on the list, yet Verizon is well positioned in the midst of the telecom revolution. To reduce risk, look for the stock to test the 200-day sma prior to starting a position.

The Bottom Line

Whenever major sell offs occur in the market it is always prudent to review your current positions and assess the stocks on your watch list for potential buying opportunities. Market corrections often provide the opportunity to purchase stocks in solid companies at a discount price. With the proliferation of ETFs and Index funds, stocks are sold off indiscriminately. Volatility and correlation in stocks increases as well.

These stocks have solid long-term growth stories and pay hefty dividends. These facts coupled with the Fed's announcement that rates will remain at ultra-low levels for at least the next two years leads me to believe these stocks are a better hedge against inflation than fixed income instruments such as bonds and CDs. Factor this in with the statistic that historically dividend-paying stocks have outperformed non-dividend-paying stocks and you have a recipe for outstanding returns.

We are talking about buying and holding these stocks for the long haul. Since these will be long-term core portfolio holdings, take your time and build your full position slowly. If you choose to start a position in any stock, I suggest layering in a quarter at a time at a minimum to reduce risk.

Source: 5 Dividend Champs With 7% Yields On Average To Buy For The Next 4 Years

Additional disclosure: This is not an endorsement to buy or sell securities. Investing in securities carries with it very high risks. The information contained within this article for informational purposes only and is subject to change at any time. Do your own due diligence and consult with a licensed professional before making any investment decisions.