With interest rates so low, investors are looking for more profitable things to do with their funds they hold in cash. Some stocks look undervalued a dividend yield perspective - and offer the potential for increasing returns in the medium term.

Defensive stocks such as utilities are an obvious place to look for dividends. Utilities have underperformed since the start of the bull rally as investors have sought the populations better adapted to the recovery. However, it is worth remembering that most utilities are at the mercy of government regulation - which could dilute earnings for shareholders if it hardens the pricing regime.

Telecommunications stocks have some of the same characteristics and the snuff is another interesting area. As anyone who is or knows, a nicotine addict can say, spending on ciggies is one of the latest household expenditure to be cut. However, there are only two stocks listed in the UK to snuff the choice is very limited.

There are also some excellent dividend yields available in the sectors which offer better risk / return, being more highly geared to economic recovery - but also an increased risk if we have a recession "double fall. "income investors who stayed away from banks in the last couple of years (and is) have done well, but could it be time to consider returning to get into the banking sector? In this sector, however, you have to do your homework.

Much more interesting for investors who want dividends degree upside exposure may be the property sector. Since the commercial property market peak in 2007, values fell by almost 40%. Many populations of the property in the UK are now REITS (Real Estate Investment Trusts). They have to distribute 90% of its rental income (as defined by the government) or give up their status REIT - so if you can pay dividends, they will. The core business in property investment generates strong cash flows to long-term yields should support 5-6%, which are common throughout the industry.

Investing income success is not easy - particularly at this stage of the cycle. Just buy the performance not enough - the dividends can be cut or completely destroyed if the company goes to skates.

As for dividend cover (the factor by which the benefit per share over the dividends paid) can help sort out companies that do not keep up. The investor would also consider supporting the balance is the dividend - How high are distributable reserves? And the company is prepared so high that might be tempted to omit the dividend to save cash?

Still, with the right research, investing the revenue can be very profitable. You should get a regular, growing income - and in the long run, if you select the right companies, you may get capital growth, too.

If you want to learn more about yield investing, it's worth checking out Stockopedia where there's a rapidly expanding resource base for UK stock market analysis, including how-to articles, wikis, portfolio tools and virtual trading simulators.

Victor Igden is a writer who spent fifteen years working in the City as an analyst. He writes a regular column about UK Value investing with his views on the best options and pitfalls for value investors in the UK stockmarket.

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