The market’s meltdown in recent weeks has sent investors scurrying for safety. For instance, unprecedented amounts of money have flowed into U.S. Treasury securities and large high-quality growth stocks. What about high-yield stocks? Aren’t they supposed to be a safe haven as well?

Lipper reports that during the three months that ended August 31, the 271 equity income funds it tracks traded down 3.8%, almost exactly in line with the S&P 500. Large-cap growth stock funds, by contrast, were off less than 1%. Many income funds were hurt by their holdings of relatively high-yielding financial services and real estate stocks, both sectors blown up by the subprime mortgage fiasco.

That, in a nutshell, is the flaw in the high-yield stock approach. Numerous studies show that over long periods of time, stocks that pay above-average dividends have reliably outperformed all others. One such survey by a professor at the University of Pennsylvania, Jeremy Siegel, shows that between 1957 and the end of 2002, the highest-yielding quintile of stocks in the S&P 500 earned 14.3%, compared to 11.2% for the overall index. That difference amounted to “three times the wealth accumulation of the index.” In other words, nothing to sneeze at.

Another enticing study comparing international results concluded that if investors allocated funds to the country with the highest yielding stock index, once again they would outperform over time. In the short run, however, managers tend to concentrate in those few industry sectors with above-average yields. That focus can be dangerous. Stephen Peterson, who has run the Fidelity Equity Income Fund (FEQIX) for many years, says “high yield does not guarantee above-average returns. Like any investment strategy, it has its moments in the market.” Mr. Peterson emphasizes total return instead of looking solely at yield. He has benefited from being relatively light in financials and has had some winners in the energy arena. His fund is up 4.4% year-to-date, while over the past 12 months he’s ahead 17%, compared with 14% for all equity income funds.

David Ginther runs the Ivy Dividend Fund, which is rated 4 stars by Morningstar and has outperformed this year. With a heavy exposure to oil and oilfield stocks, his fund is up 8% year-to-date, and ahead nearly 16% for the past 12 months. He has a slightly different take on running an income fund.

He emphasizes “dividend growth over current high yield. There’s usually a reason stocks have a high yield — either a problem in the business or in management. Companies that have confidence in their earnings outlook and their business model raise dividends over time.” Mr. Ginther says he has liked the energy sector for some time. “I like to follow cash,” he says. “Who has cash? The major oil companies. They are going to spend that cash and the oil field service companies will benefit.” Hence, Mr. Ginther has Schlumberger and Baker Hughes International in his portfolio.

That this intelligent stock selection has produced winning results for Mssrs. Peterson and Ginther would not surprise Don Schreiber, author of “All About Dividend Investing” and founder of money management firm Wealth Builders. The key, in his view, is to keep a sharp eye on valuations. “There has to be other screening going on” he says, and notes, for instance, that despite the increasingly attractive yields offered on financial service stocks: “It’s way too early. Within the next six months we’ll see a bottom, and there will be some tremendous values.”

For many reasons, some old and some new, the number of equity income funds has doubled in recent years. The tax relief bill passed in 2003 sparked interest in the group as it significantly lowered the tax rate on dividend income, making high-yield stocks more attractive. Also, while dividends have traditionally been considered emblematic of stability and financial soundness, they offer the added attraction of dampening volatility. Because a greater portion of overall return comes from a fixed payment, the underlying stock should trade within a more narrow range than a stock with a lesser yield.

It is also true that with so many in America approaching retirement age, the quest for income has become more energetic. Christopher Davis at Morningstar adds that dividend-paying stocks have benefited from all the corporate scandals in recent years. Phony or opaque accounting can cast doubt on a company’s earnings report; dividends are hard, cold cash. As Mr. Davis says: “You can manufacture earnings but you can’t manufacture dividends.”

Mr. Davis also points to the growing universe of companies paying dividends as attracting investors to the sector. “In the late 1990s, no one would have launched such a fund; they would have had to change their mandate. Today, even companies like Microsoft and Intel are paying dividends.”

Mr. Peterson notes that high-yield stocks have other attributes. “People look at this as a good, steady, high-quality fund,” he says. “The vast majority of people are rolling over their dividends, so it’s not just about current income. One of the by-products of our approach is that we have a value orientation.”

One of the happy by-products of that characteristic, he notes, is that private equity firms have bought up many such companies, which usually are selling at modest multiples of cash flow. Indeed, his fund has had holdings in a number of companies that have been taken over, including Freescale Semiconductor and Clear Channel Communications.

This extra gloss on the high-yield stock sector may have disappeared for now. “For the time being, the takeover binge is probably behind us,” Mr. Peterson says. The dividends, however, will continue.