Looking for income stocks with momentum With the U.S. stock market surging, it's a good time to look for income stocks that have momentum on their side. These stocks may appeal to both dividend hunters and growth seekers. Our friend Craig McGee, senior consultant at Morningstar Canada, screened the CPMS U.S. database for stocks that met the following criteria: a current price that is within 5 per cent of 12-month highs; a market cap that is greater than $500-million (U.S.); an expected dividend yield of 3 per cent or greater; a payout ratio (using estimated 2013 earnings per share) of 50 per cent or lower; To ensure adequate diversification, Mr. McGee permitted no more than four stocks from any single sector. The 18 companies that qualified are sorted with those closest to their 12-month highs at the top. More about Morningstar Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia. Its investment research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers. CPMS figures cover more than 95 per cent of the investable North American stock market. An impressive list of brand-name dividend generators, ranging from Johnson & Johnson, purveyor of health-related goods, to Olin Corp., maker of bleach and ammunition. Each of these companies yields more than you will get from a GIC or bank account and all of them are trading within a whisker of their annual highs. Will they be good investments over the next few months? Generally, it's a good idea to bet on companies with momentum - a rising share price - but in this case a lot hinges on your outlook for interest rates and the global economy. Dividend-paying companies have been propelled higher in recent months by investors" thirst for yield. A more buoyant economy and a rise in interest rates could slake that thirst by providing more alternatives for investors. Do your own research before buying any of the companies listed here.