The stock market is, by nature, somewhat capricious. But if a portion of your portfolio contains dividend-paying investments, you can expect that at least a portion of your returns will be more predictable than the day-to-day value of your stocks.
"Capital growth is not where it's going to be. We're only expecting 2 percent (gross domestic product) growth this year, and I don't see that changing over the next few years. Dividend income is where you have to focus," says Julie Murphy Casserly, CFP, founder and president of JMC Wealth Management in Chicago.
Dividend income is not insignificant. According to Standard & Poor's, dividends made up 42.54 percent of the annualized total return of the S&P 500 index from January 1926 through September 2011.
Standard & Poor's tracks companies on their S&P 500 that have increased dividends every year for 25 years. Known as the S&P 500 Dividend Aristocrats index, it's comprised of large-cap, blue-chip companies. The value of the stocks may fluctuate, but the dividend yields will likely continue.
"Global concerns and political nonsense aren't going away anytime soon, so grab as much yield as you can," says Robert Laura, president of Synergos Financial Group in Howell, Mich.
"Investors should buy companies that they like, use often and would recommend to others -- that pay a dividend above 2 percent since this is what the 10-year Treasury is basically paying," he says.
The dividend yield of the S&P 500 Dividend Aristocrats index is 2.82 percent.
-- Sheyna Steiner