‘Stocks fall on Greek concerns’; ‘stocks rise on hope of Greek deal’. Pick a day, pick a headline. Back and forth. Wish the markets and the Germans would make their minds up. So whilst the Greeks are having problems paying their lenders, which stocks are paying shareholders good dividend income? And given the Xtrata takeover, who may else be likely to be a takeover target?

Those stocks with some of the best dividend yields, in other words paying the most income for every £100 of shares, are Man Group (10% per annum), RSA Insurance and International Power (8% pa in dividends). That’s not a bad return. Of course the risk is the share price could fall. And indeed with Man Group it’s been sliding all of last year, but now appears to have made a comeback.

The FTSE 100 measure of the UK’s largest 100 companies is up for the year, but still under 6,000 (which was the 2011 peak and a level first hit in 1998! As I write a report states that UK retailers had their second worst January since records began 17 years ago. This follows from a December which saw the end of La Senza, Barratts and Peacocks.

Indeed Morrisons which was one of the best performers in 2011, has since January fallen to its April 2011 share price levels, which it first hit in 2007. But Next, which also had a great 2011 for its shares, although falling in January, has already recovered to where it peaked in 2011 and sits at an all-time high.

So what of takeover targets? Well one place to often look is at the undervalued companies. Those whose profits per share are not reflected in their share price. Of the 100 largest UK companies – those in this category are: Cairn Energy, Rio Tinto, BAe Systems. The other place to look are some of the poor performers because a bidder will look to buy something they can turnaround to former glory days. Essar would be on the cards on that basis as would Admiral and Man Group.

Of course buying in expectation of a takeover is not a clever strategy as you could end up waiting a long time. The final category of target is the perennial riser. Here the company doing the take over wants to buy the target because of its superior performance. So in the case of Autonomy, HP wanted to buy it because its share price only ever rose.

Companies whose share prices only ever seem to reach for the skies include Tullow Oil, Randgold Resources, Aggreko, Diageo, Bunzl, SAB, Xstrata, Next, Intertek.

Well that’s enough names to be going on with. If your goal is to beat the index, then those ones should be an excellent start.

Alpesh Patel

Founder: http://www.investingbetter.com