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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.

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