Grappling with where to spend that extra dollar as the bull run for U.S. equities rages on? Try some unloved consumer staples stocks and tobacco companies dishing out dividends, says one veteran money manager.

Stocks with higher valuations, such as tech, that pay low dividends have been trouncing cheap equities with big payouts, but that may be about to change, according to Ben Lofthouse at Janus Henderson. The valuation gap is now so stark that it’s driving him into companies like General Motors, with an expected dividend yield more than double the S&P 500 average.

“There is still a wide dispersion of valuations,” Lofthouse, the firm’s head of global equity income, said by phone from London. It “gives the potential for the market to rally,” he said.

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Valuation is generally a poor tool for market timing but with the longest ever bull market pushing up multiples it is perhaps more relevant now. While he’s not abandoning tech winners altogether -- Microsoft remains the biggest holding in one of his funds -- Lofthouse is betting the next wave of gains will come from other sectors.

The performance of Janus Henderson’s global equity income fund reflects how out of favor dividend capturing has become as an investment style. The $5.7 billion fund has lagged behind the MSCI World Index and the majority of peers its grouped with, though many of those funds do not place the same importance on income. The fund gained 4.1 percent a year since it began in 2006 through the end of June, compared with 5.3 percent annualized advance on the global stocks index it tracks, according to its sales document.

Tobacco companies that have gone grown market share through mergers in recent years should do well due to stable revenues that dish out plenty of cash to shareholders, he said. British American Tobacco and Imperial Brands, which both have dividends of more than 5 per cent, are among his largest holdings.

For now, Lofthouse is fighting the tide. Stocks with the highest dividend yield and the smallest price-earnings ratios are among the worst performing shares since Jan. 26, according to an analysis from Bespoke Investment Group LLC. Laggards IBM and General Motors “are still very, very cheap,” he said, with forecast dividend yields greater than 4 per cent.

Janus Henderson had 280.3 billion pounds ($365 billion) in assets under management at the end of June, according to its website.