Cash accounts and CD yields are measured with a microscope. Long-term bonds have higher returns, but lock in low yields while the Federal Reserve is working feverishly to increase inflation. Investors looking for good yields that can outpace, or at least keep up with, inflation should consider stocks for at least part of their income solution.

The Motley Fool's CAPS screener went for a spin and identified several income-producing candidates using the settings listed below.

  • Current yield over 3.65% to top the 10-year Treasury.
  • Price-to-earnings ratio positive and less than 18.5 -- the average P/E of the S&P 500 as reported by Barron's.
  • Long-term debt-to-equity ratio less than 1. High debt loads make it tough to grow a dividend if business gets bumpy.
  • Market capitalization of over $1 billion. Large and mid-cap stocks aren't automatically safer than small caps, but larger companies are generally more established.
  • Earnings growth rate for the past three years greater than 4%. Earnings growth is key to being able to increase a dividend.
  • Current ratio greater than 1 to find companies with enough cash on hand to pay their bills.
  • Finally, a CAPS rating of four or five stars (out of five) to focus on companies our Foolish community believes are the best prospects.

The screen returned the seven stocks listed in the table below. Payout ratio and dividend growth were checked for each stock to look for signs of trouble and make sure the stocks caught in the screen were growing their payouts.


Current Dividend Yield

EPS Growth Rate
(Past 3 Years)

P/E Ratio (TTM)

CAPS Rating
(out of 5)

Payout Ratio

Average Dividend Growth
(Past 5 Years)

Abbott Laboratories (NYSE: ABT) 3.9% 9.5% 15.4 ***** 58% 9.9%
Alliance Resource Partners (Nasdaq: ARLP) 4.7% 12.8% 14.5 ***** 63% 14.7%
Bristol-Myers Squibb (NYSE: BMY) 5.2% 10.6% 14.1 **** 54% 2.9%
Kimberly-Clark (NYSE: KMB) 4.3% 3.7% 14.8 **** 59% 8.0%
Kraft Foods (NYSE: KFT) 3.8% 13.0% 12.8 **** 45% 5.9%
Public Service Enterprise Group (NYSE: PEG) 4.2% 7.4% 10.2 **** 42% 4.1%
Sysco (NYSE: SYY) 3.7% 3.9% 14.6 ***** 64% 10.3%

Source: Motley Fool screener results, Yahoo! Finance, and author's calculation. TTM = trailing 12 months.

Even though this list looks like a nice dividend portfolio, the results should be considered ideas for further research, not outright buy recommendations.

But in terms of diversification, the group looks attractive. The seven stocks cover a number of sectors. Abbott Labs and Bristol-Myers Squibb are health-care stocks, while Kimberly-Clark and Kraft Foods are well-known, blue-chip consumer giants. Alliance Resource Partners is a master limited partnership producing and marketing coal. Electric and natural gas utility Public Service Enterprise serves customers in the mid-Atlantic region. And Sysco provides food and supplies to restaurants, cafeterias and caterers.

Those are very different industries. But the companies all have one thing in common: stable businesses that aren't likely to see big swings with the economy. That makes them worth a closer look.

More dividend Foolishness:

Fool contributor Russ Krull owns shares of Sysco, but has no position in any other stocks mentioned. Sysco is a Motley Fool Inside Value recommendation. Alliance Resource Partners, Kimberly-Clark, and Sysco are Motley Fool Income Investor picks. Motley Fool Alpha owns shares of Abbott Laboratories. The Fool has a disclosure policy that produces dividends with every article.