Wouldn't it be great to get paid for holding a stock, even while the market clobbers its price?

You can, of course -- if the stock pays dividends. While much of the news in recent months has gone to companies that have slashed or altogether eliminated their payouts, plenty still pay dividends -- and some have even raised them recently, despite the economy.

Yes, raised. Think that might be a buy signal?
It often is. Although rising dividends aren't always a good sign -- doomed investment bank Lehman Brothers raised its dividend 13% early in 2008, a hike that it clearly couldn't afford -- a company that raises dividends is generally feeling pretty good about its prospects.

If, of course, the feeling is backed up by a look at fundamentals. Can the business support an increased payment? Is its cash flow sustainable, even in the face of a dark economy? If you can answer "yes" to those simple questions, then the company is worth serious consideration.

The case for dividend stocks
Dividend investing may seem old-fashioned, but in this sort of market, finding a company that is paying a good dividend can be a very good thing. It's a distinctive thing, too -- according to Standard & Poor's, which tracks over 7,000 public companies, only 233 increased their dividends in the second quarter of 2009. That's a record low.

Dividends, of course, are a company's way of sharing profits with its owners -- the folks who hold its stock. The stream of payments, usually made quarterly, is often expressed as the company's dividend yield, which is simply a year's worth of dividends expressed as a percentage of the current stock price.

In good economic times, a dividend yield of 2% is considered solid -- but nowadays, with stocks across the market still down from their bull market highs, it's not uncommon to see dividend yields of 3% or more -- sometimes a lot more -- from conservatively run companies. If the company can sustain its dividend, that yield represents money you'll be making no matter what happens to the stock price.

Putting the cash to work
If you're in retirement, dividends can be a helpful part of your overall income picture. If you're in wealth-building mode, reinvesting those dividends -- using them to buy more shares of the stock -- allows you to take advantage of dollar-cost averaging without having to add to your initial investment.

And here's a secret: Reinvested dividends have built an awful lot of fortunes over the years. Dividend-paying companies might seem boring compared to, say, fast growers, but those steady payouts through bull and bear markets can really pile up over time.

Who's paying the big bucks?
Finding a good company paying a sustainable dividend is a good thing. Even better, as I mentioned above, are companies confident enough about their prospects to raise their dividend payments in this market. Here are a few companies that have done just that in recent months:

Company

CAPS Rating (out of 5)

Current Dividend Yield

Size of Recent Dividend Increase

Abbott Labs (NYSE: ABT)

****

3.6%

11%

Enterprise Products Partners (NYSE: EPD)

*****

7.7%

5.8%

General Mills (NYSE: GIS)

****

3.2%

9%

IBM (NYSE: IBM)

***

1.9% Continued...