What would dividend stocks look like if you viewed them the way a fixed-income analyst looks at bonds?

To find out, I spoke with James “Jay” Wong, managing principal and head of equity strategies at Payden & Rygel, a $100 billion employee-owned asset manager whose roots are in fixed income. Wong is co-manager of the firm’s no-load Equity Income Fund (PYVAX), its sole equity mutual fund offering.

“We focus on high-dividend stocks, and our approach — given our background — is to look at the portfolio through a fixed-income lens,” said Wong, whose fund has $680 million in assets and operating expenses of 0.8%. “I believe our approach makes us realists and gives us a better perspective. We look at things that other equity managers might not, like leverage, access to capital markets, debt repayment schedules and other criteria that our fixed-income analysts and managers look at.”

In addition to common and preferred stocks that are conventional dividend-payers, the fund owns real estate investment trusts (REITs) and master limited partnerships (MLPs) that Los Angeles-based Payden & Rygel have thoroughly scrutinized on the fixed-income side, since REITs and MLPs are regular issuers of debt.

“We think this is a very attractive time for dividend stocks, even if valuations are a bit extended,” Wong said. “With interest rates so low, it’s hard to find attractive income, let alone growing income. But dividend stocks are doing it. Some are out-yielding their company’s bonds.”

Wong noted that the dividend of the S&P 500 is currently about 2.2%, while 10-year Treasuries are yielding 1.9%.

“We haven’t seen anything like that in about 60 years,” he said. “The equity space is a very viable for income.”

Wong has whittled down the fund’s energy holdings and is rotating into the consumer discretionary, consumer staples and information technology sectors.

“In consumer goods, I really like Altria and McDonalds. Do I think they’re overvalued? When I think of overvalued, I think of growth names with high P/Es. When I look at the dividend market, I don’t see bubbles in companies that have above-average P/Es but are producing yields of 3%-5% in this environment,” he said.

While real estate prices are high, Wong believes that the real estate financing market is in better shape now than it was eight years ago and doesn’t see a real estate bubble.

“Credit standards are higher now, and REITs can still experience moderate dividend growth,” he said.

In energy, however, he sees a different picture. His fund now owns only two oil companies — ExxonMobil and Chevron — which he believes have the financial strength to weather the current downturn and continue to pay dividends.

“One company that can actually benefit is ExxonMobil,” he said. “They have liquidity, can tap the capital markets, and can acquire assets cheaply.”

Troubles in the oil patch, however, have made Payden & Rygel very cautious about MLPs, which once accounted for as much as 18%-19% of the portfolio, but are now down to 2% of the total, he said.

For Wong, directing his fund’s investments isn’t just a job, but a reflection of his deep conviction about how serious money should be invested. He notes that his own retirement money is in the fund, joking that he drinks his own “dividend Kool-Aid.”

Given his fund’s five-star rating over five years and its 12.43% annualized returns over that same period, it’s easy to see why so many investors feel the same way.