Here are 3 under valued small caps trading for a P/E under 11 that are paying a dividend yield in access of 5%. All three have no debt. Each operates in a different industry. All three have a double digit return on equity, return on assets as well as double digit earnings growth over the last 5 years.

Terra Industries Inc. is a leading international producer of nitrogen products for agricultural, industrial and environmental markets. They own and operate six North American nitrogen products manufacturing facilities and own 50% interest in joint ventures in the United Kingdom and The Republic of Trinidad and Tobago. Our headquarters is in Sioux City, Iowa. Terra provides products that are essential to meeting the needs of a growing global population. Their nitrogen product line includes ammonia, urea ammonium nitrate solutions (UAN), ammonium nitrate (AN) and urea. With the capacity to produce about 6.5 million tons of product at our North American facilities annually, Terra is a vital contributor to the markets they serve.

USA Mobility, Inc., headquartered in Alexandria, Virginia, is a leading provider of paging products and other wireless services to the business, government and healthcare sectors. USA Mobility offers traditional one-way and advanced two-way paging via its nationwide networks covering over 90% of the U.S. population and with roaming partners in Canada and Mexico. In addition, the company offers mobile voice and data services through Sprint and Nextel including BlackBerry and GPS location applications. The company’s product offerings include wireless connectivity systems for medical, business, government and other campus environments. USA Mobility focuses on the business-to-business marketplace and supplies mobile connectivity solutions to over two-thirds of the Fortune 1000. In addition to its reliable, nationwide one-way networks, USA Mobility’s two-way networks have the largest high-powered terrestrial ReFLEX footprint in the United States with roaming partners in Canada and Mexico. USA Mobility provides the preferred ReFLEX wireless data network for many of the largest telecommunication companies in the United States that source network services and resell under their own brand names.

Life Partners Holdings, Inc. is a financial services company and the parent company of Life Partners, Inc. (“LPI”), one of the oldest and most active companies in the United States engaged in the secondary market for life insurance known generally as “life settlements.”These financial transactions involve the purchase of life insurance policies at a discount to their face value for investment purposes. LPI originates, analyzes, and purchases life settlement transactions on behalf of its worldwide network of clients. By selling a life insurance policy, the policyholder receives an immediate cash payment to use as he or she wishes while the purchaser takes an ownership interest in the policy at a discount to its face value and receives the death benefit under the policy when the insured dies. Life Partners was instrumental in the formation of this industry and asset class. Since its incorporation, it has facilitated over 84,000 transactions associated with the purchase of approximately 6,000 policies totaling over $1.8 Billion in face value.

Their are several different dividend strategies for picking stocks such as “The Dogs of the Dow”, “The Dow 5″ and “The Foolish 4″ (more on these another time). Each has its own variation for selecting stocks by their dividend yield. While some stocks with high yields indicate that the business itself maybe struggling, on the flip side it can be construed as a sign of strength. Many might swear by these mechanical stock picking methods, however their is more to choosing good quality stocks than just by using some mechanical formula. While  the dividend is one of the tools in choosing good quality stocks, it is only that, one tool. Highlighted below is a current list of Dow 30 stocks which are ranked  in order of  highest to lowest by dividend yield.

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