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Once upon a time, I worked in an office beneath a sign that read:  “We’re a non-profit company…but we didn’t plan it that way.”

I feel a similar emotion as I write today about all the wonderful buys this market correction has created for dividend income investors.

I’m a dividend income bargain hunter…but I didn’t plan it that way.

Nonetheless and despite my chagrin, I think the bargains in this market are too amazing to pass up. The 12% drop (as of May 25) in the Standard & Poor’s 500 Stock Index from the April 23 high pushed up yields to the point that some stocks I never thought I’d ever put in a dividend income are  begging to join the Jubak Dividend Income portfolio )

Intel (INTC) yielding 3.1%. Nucor (NUE) at 3.4%. Nokia at 4.3%. Taiwan Semiconductor Manufacturing (TSM) at 3.7%. When a 10-year Treasury is yielding just 3.15%.?

Now if I can find yields like that by just rolling out of bed and over to my computer, think what a little digging will do.

You remember the rules of the Dividend Income Portfolio, right? The goal was to beat the yield on the 10-year Treasury with the dividend from a common stock (or its near equivalent.) By sticking to common stocks where the dividend rises over time (if you pick the right stock) unlike a bond where the coupon interest rate is fixed at issue I gained an edge against any return of inflation or higher interest rates. A stock like Verizon (VZ), for example, which has grown its dividend payout by almost 4% a year over the last five years, provides good protection for income investors against rising interest rates.

Of course, while the rules of the portfolio may not change, market conditions do. Right now, thanks to the euro debt crisis, it doesn’t look like income investors need to worry about inflation or higher interest rates any time soon. And right now equities are demonstrating, for anyone who had forgotten (hah!), that stocks are risky and volatile. So in adding to the portfolio now I’m a little less concerned about avoiding interest rate increases and a little more concerned with getting more yield, a lot more yield, than I’d get with a much less risky Treasury note.

So I’m looking for a stock or two that will beat not the 3.15% yield on the 10-year Treasury but the 4.28% yield on Dividend Income portfolio member Rayonier (RYN) and the 4.63% yield on E.I. du Pont (DD). They’re the two lowest yielding stocks in the portfolio. (Well, except for Telkom Indonesia (TLK), but I think that stock has more upside in any end of 2010 recovery from the current emerging market selloff.)

Ok. If I’m selling Rayonier and du Pont out of the Dividend Income portfolio what am I replacing them with? (I’m also selling Rayonier out of the Jubak’s Picks portfolio with today. You’ll find more detail on that sell in a post later today.)

There are high yielding stocks that I think are just too risky. Deutsche Telekom (DT), for example, yields 9.6% right now but its wireless business is struggling and I don’t see a turn around as likely, Barnes & Noble (BKS) yields 5.2%, but, well, you know what’s going on in the book business these days.

On the other hand, I would say that Spain’s Banco Santander (STD) isn’t as risky as it seems and the ADR’s 8.5% yield amply compensates me for that risk. Banco Santander looks like it’s going to emerge as one of the winners of Spain’s banking crisis. Spain’s big banks have lost market share in the last two years to regional banks that have kept on making real estate loans even as the risk of those loans defaulting was climbing. Now those regional banks are in deep, deep trouble and the Bank of Spain has begun shutting the worst of them and forcing others to combine. I think that will put business back in the hands of Banco Santander and Banco Bilbao Vizcaya Argentaria (BBVA). The dividend yield on Banco Bilbao is just 6.2%. (For more on the state of banking in Spain in particular and Europe in general see my post )

(Most U.S. banks haven’t yet restored the dividends on their common stock that they were forced to cut when they took taxpayer cash in the post-Lehman Bros. bailout of the sector. I have found one interesting play among the U.S. group—although since it’s not a common stock, it doesn’t fit in the Jubak Dividend Income portfolio. But it might fit in yours so let me mention it. The stock is JPMorgan Chase, 8.625% Non-Cumulative Preferred Stock, Series (JPM-I). The symbol on Yahoo Finance is JPM-PI; at Charles Schwab, where I bought some recently, the symbol is JPM+I. The CUSIP is 46625H621. The preferred shares were issued with a coupon rate of 8.625%. On May 25 they were trading slightly above the par value of $25 so the yield was about 7.9%. The shares have traded as high as $29 recently and I wouldn’t buy there since they can be called away from investors at $25 as early as September 2013. But if you can buy the shares near $25 or $26, I think the yield and the potential capital gain from any reduction in sector risk make the shares attractive.)

For my second pick, I’m going for a class of stock even more in the dog house than a European bank stock. Total (TOT) is a European oil stock. Shares have dropped from $65 at the beginning of 2010 to $45 now. That’s driven the yield up to 6.5%, considerably above the yields for U.S.-based oil companies such as Chevron (CVX) at 3.8%.

The company increased production in the first quarter by 6% and while its refinery business is running way below capacity (and it being France Total faces intense political pressure not to close any refineries), it’s chemical unit has enjoyed the same cost-savings and demand recovery that have buoyed stocks such as du Pont.

With any oil company these days an income investor has to ask how safe is the dividend if oil prices continue to fall or just stay at current depressed levels. Total finished the first quarter with a very modest 34% debt to equity ratio and with $17 billion in cash and cash equivalents on its balance sheet. That dividend looks secure to me.

Let me spell out the assumptions behind making any picks right now. Yes, stocks can continue to go down in price and my guess is that until the markets can put the euro debt crisis and fears of a growth slowdown in China in the past stocks will have a hard time moving up. (For more on my view of the market right now see my post )

But with a dividend income play you are being paid to wait—as long, at least, as the company is financially sound enough so that it can survive the turmoil without cutting its dividend or worse.

And, of course, if you’ve picked the right high yield stocks—say one that sold off along with the rest of European banks or with the general downturn in commodity stocks—after you’ve waited, collecting your dividends, for long enough you should be rewarded with tasty capital appreciation.

Full disclosure: I own shares of Banco Santander, JPMorgan Chase Preferred, and Rayonier in my personal portfolio.