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10 Undervalued Companies With High Shareholder Yield

Investors can widen their opportunity set by redefining 'yield.'

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There are two ways companies can put money back in shareholders' pockets: by paying a dividend or buying back shares of their common stock. From a shareholder's perspective, which is better?

Dividends vs. Buybacks
Investors have long cherished dividends because they provide steady income. After all, "[A bird] in the hand is worth the whole arithmetic in the bush," as Hetty Green once quipped. And assuming the company pays a qualified dividend, which most U.S. companies do, the income is taxed at a preferred rate--investors in the highest tax bracket will pay 20%, while investors in the middle brackets will pay 15%, and investors in the bottom two tax brackets will not owe any income tax on dividend income.

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