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Keep These Dividend Payers on Your Radar

It's getting harder to find to find decent, sustainable income in the stock market, but these stocks fit the bill.

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Looking for income in today's stock market seems like it is becoming harder and harder. The yield on the S&P 500 is stuck around 2.00%, and though that might be better than investors can get in parts of the fixed-income market, it is hardly enough income to make people happy. However, even if the broad market isn't going to satisfy income cravings, there are still individual stocks that fit the bill.

First off, why are yields so depressed? The problem doesn't seem to be that stocks are too expensive; Morningstar's stock analyst team thinks equities are about 8.00% undervalued right now. One issue is that financials stocks aren't paying out the kind of income they used to; the financials sector currently has a yield of only 1.74% (as measured by the 12-month yield on  Financial Selector Sector SPDR (XLF)). Banks are in many ways still recovering from the 2008 crisis, and regulators have been hesitant to allow institutions to pay out a large share of earnings to shareholders. Instead, they are being asked to build up larger capital positions to protect the system in the case of another shock. This might not be a bad idea from a systemic-risk standpoint, but it reduces opportunities for dividend investors.

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Jeremy Glaser does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.