Dividend-paying stocks are as close to a “no-brainer” investment as they come.

#-ad_banner-#You only need to look back at the last four decades to see just how smart having your money in these income producing machines has been.

According to a 42-year study by Ned Davis Research, from 1972 through December 2013, U.S.-based dividend stocks in the S&P 500 returned 9.3% a year on average — far exceeding the 2.3% annual return for S&P stocks that didn’t pay dividends.

There’s just one problem with them right now.

As dividend stocks have attracted more and more money over the past few years, there’s concern that some have become overvalued.

I showed readers quite a few of these widely-held, yet overvalued dividend payers in a recent article. And one of our income investing experts — Amy Calistri, Chief Investment Strategist for StreetAuthority’s newsletter, The Daily Paycheck — first wrote about this troubling trend (along with a few more overvalued dividend stocks she found) over a year ago:

Valuations of defensive dividend-paying stocks have become downright lofty. The irony, of course, is that the overcrowding in these “safe” stocks is making them less safe…

Could these above-average valuations hold? It’s possible. If global economic conditions worsen, the demand for defensive stocks may hold steady.

[But] even a small downdraft in “safe” stocks could trigger an exodus out of defensive equities back to the sidelines.

There’s another catch to dividend stocks right now. Recall that dividend yields and stock prices move in opposite directions. As more investors have piled into dividend payers, share prices have gone up and dividend yields have gone down.

Today the average dividend yield for a typical stock traded on the NYSE is just 2.2% — less than half the historical average of 4.45% that U.S. stocks have paid going back to 1871.

So with traditional dividend payers now trading at premium valuations, and market yields at record lows, how can income investors find quality, higher-yielding stocks in today’s market?

After months of research, Nathan Slaughter — Chief Investment Strategist for StreetAuthority’s flagship income newsletter, High-Yield Investing — has found an answer.

Nathan’s been stressing a new mantra to readers in his latest research report on dividend payers:

To maximize your returns and minimize your risk, find dividend-paying companies that reward shareholders with two “extra” payment methods.

As Nathan explains, “Unlike dividends, these extra payment methods are under the radar, buried in company financial statements. But find the right companies that pay them and you could get up to three times more return than you could from dividends alone.”

Nathan told readers about one of these extra payment methods, which he has nicknamed “tax-free dividends” in a recent article (which you can read here).

Now, when he says “tax-free dividends” he’s actually talking about share buybacks. But that’s how we think they should be thought of.

You see, when a company buys back its own shares, the existing shares that stockholders own become more valuable — which usually coincides with an increase in stock price. And unlike dividends, shareholders receive this “extra payment” without having to pay a tax.

Since 1997, buybacks have become the most popular form of payment for companies. Just look at how companies have been paying shareholders since 1982. Buybacks really start to pick up after 2005…

While traditional dividends are becoming second fiddle to buybacks, that’s not such a bad thing. As Nathan explains, “[Buybacks are] a proven way of not only returning [tax-free] money to shareholders, but also boosting share prices over time.”

Indeed, looking at the Powershares Buyback Achievers ETF (NYSE: PKW) — which is made up of the market’s top buyback companies — you can see how companies that aggressively buy back their own stock have outperformed the market in the past.

In addition to buybacks, Nathan has been researching a second, “extra payment” method that most dividend investors overlook — one that also leads to market-beating returns.

During tough economic times, a heavy debt burden can be crippling [to a company] because bank lending dries up. Companies can’t raise the funding required to operate their business or pay off their existing loans.

That’s why you need to not only seek out companies that pay dividends and buy back shares, you also need to seek the ones that are paying down debt.

Nathan argues that every debt payment is like an indirect payment to you, the shareholder. It relieves a company from interest payments, freeing up money that could later be spent on dividends and share buybacks.

History proves Nathan’s point… While shareholders may not receive this “payment” directly, they have been rewarded with market-beating capital gains over time.

In fact, going back to 1982, the top 25% of debt-reducers traded on the S&P outperformed the S&P 500 by more than 2 percentage points a year on average…

As Nathan puts it, “the less money a company is obligated to pay creditors, the less volatile the stock tends to be during market downturns and the more it has to line your pockets.”

So, naturally you may be wondering, “if dividend-paying stocks beat the market over time, and companies that buy back stock or reduce their debt loads also beat the market, then what happens when you invest in companies that do all three?”

This is exactly what Nathan’s research sought out. And after months of poring through academic studies and back-testing various investing scenarios, he’s discovered that finding stocks that combine dividends, buybacks and debt paydown leads to far better total returns over time than using any of these strategies in isolation.

Nathan’s latest research backs this claim up. He’s found a special group of dividend-paying stocks that have rewarded investors with billions through these two “extra” payment methods.

Because these stocks carry more than just dividend yields, Nathan calls them “Total Yield” stocks.

As a testament to their safety, Nathan found that stocks with the highest Total Yields outperformed the S&P during the “dot-com” bubble and the 2008 financial collapse.

His research also shows that from 1982 through 2011, the top 25% of stocks ranked by their Total Yield score returned 15.04% per year — outperforming the S&P 500 by a large margin. And last year, 24 out of 25 of the stocks with the highest Total Yield ratings more than doubled the S&P 500’s return.

Nathan’s so convinced that this method of investing works that he’s created an entirely new newsletter advisory devoted to this revolutionary investing strategy. It’s designed for income and growth investors who want to maximize their returns from dividend-paying stocks.

To learn more about Nathan’s new Total Yield strategy, and get details on several dividend stocks paying Total Yields up to 25%, we invite you to watch his free research video.