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Portfolio manager William McGough screens for dividend-paying stocks with strong balance sheets for his 50-stock Stadion Alternative Income Fund (TACFX) . And while Microsoft's (MSFT) - Get Microsoft Corporation Report  stock may have been knocked down last month after its third quarter earnings miss, the company's cash hoard and 3% yield put it right up McGough's alley.

"The technology sector generally does not have many companies that pay a good dividend because of the nature of the growth aspect of the sector and Microsoft is one of those quality stocks that actually pays a good dividend, so therefor it makes its way in the portfolio," said McGough.

The Stadion Alternative Income Fund has returned 4.9% thus far in 2016, according to Morningstar. The $89 million fund has gained 7.3% in the past year, outpacing 98% of its Morningstar category peers. The fund sports a trailing twelve month yield of 1.7%, according to Morningstar.

McGough also owns Exxon Mobil (XOM) - Get Exxon Mobil Corporation Report  in the fund. The oil major has bounced back with oil prices in recent months, rising over 14% year-to-date while paying a 3.4% dividend.

"Exxon is a flight to quality name," said McGough. "You still want to own Exxon no matter what oil is doing because of the capitalization of the company and the stock helps keep our portfolio's energy allocation in line with the S&P."

Johnson & Johnson (JNJ) - Get Johnson & Johnson Report  shares are up over 11% year-to-date. The health care giant with the 2.8% dividend yield has performed well this year as investors seek stability in consumer staples. McGough said his fund holds Johnson & Johnson shares, yet also uses an option overlay to make sure the consumer staples portion of the fund does not grow too large.

Finally, McGough owns AT&T (T) - Get AT&T Inc. Report , up 14% thus far in 2016, in the Stadion Alternative Income Fund. The telecom giant pays a healthy 4.9% and it is currently an overweight in his portfolio.

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