As I pointed out at the beginning and middle of 2008, dividend-paying stocks make the best bear-market investments.

The reasons are simple:

But as I pointed out in February, it's important for investors to invest in only the strongest dividend-paying companies -- in other words, companies with realistic payout ratios.

Was this smart advice?
It's true, I probably would have shied away from writing a follow-up column if I had screwed up ... but I didn't.

From the market's bottom on March 9 to market close yesterday, dividend-paying stocks -- as tracked by the iShares Dow Jones Select Dividend ETF -- are outpacing the S&P 500 by a respectable margin: 47.6% to 45.5%

That's good news for investors who were fortunate enough to buy at the perfect entry point.

It's not bad news for everyone else
See, despite that almost-50% run-up, today is still a perfect time to get in on dividend-paying stocks.

Why?

Despite the run-up, many strong stocks are still yielding more than their five-year average -- but not because their underlying businesses are on the rocks. No, these high yields exist purely because the stock's price is still depressed.

Just take a look at these blue chips and their attractive yields. All of these companies have increased their dividend payments over those five years (an excellent sign of health).

Company

5-Year Average
Dividend Yield

Current
Dividend Yield

5-Year Average Growth Rate
in Dividend

Wal-Mart (NYSE: WMT)

1.5%

2.2%

17.7%

ExxonMobil (NYSE: XOM)

1.8%

2.5%

9.0%

Intel (Nasdaq: INTC)

1.9%

3.0%

30.9%

Procter & Gamble (NYSE: PG)

2.0%

3.4% Continued...