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Winning the Quest for Yield

These stocks have healthy payouts and the cash flows to support them.

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Stocks that pay meaningful dividends are still something of an anachronism. Even after the recent tax package significantly reduced tax rates on stock dividends, the average company in Morningstar's U.S. Market Index still pays out a paltry 1.5% yield. That's not much to write home about, especially if you're counting on regular payouts to supplement your income. 

But it's still possible to find companies that pay out decent dividends, if you dig around a bit. We wouldn't recommend just screening for companies with the highest yields in absolute terms--you'll end up with a motley crew of REITs, limited partnerships, and financially distressed firms that are bleeding red ink. Instead, focus on companies that pay out healthy dividends and generate enough cash to support them.

Amy C. Arnott does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.