Tell me if this sounds like you:

These are not insignificant predicaments, but don't worry -- I have good news for you. You may be able to vastly improve the trajectory of your portfolio by investing in a particular kind of stock: the kind that pays out solid and growing dividends.

Why dividends rule
By now, I hope no one perceives dividends as sleepy little components of even sleepier big stocks. If you do, well, let me convince you otherwise: There are lotsof reasons to love dividends.

1. Cash consistency
For starters, dividends are generally paid to you regardless of how the underlying stock (or overall stock market) is performing. Think back to the ugly year that was 2008. Even through all that market carnage, most companies still kept paying out their dividends. Many even raised them.

ConocoPhillips (NYSE: COP), for instance, lost roughly 40% in 2008, but it's been paying out $0.47 per share every quarter for more than a year -- a rate 15% higher than its prior dividend amount. And it recently boosted that to $0.50. Meanwhile, Altria (NYSE: MO) has been climbing back this year after having fallen somewhat last year, but has consistently paid cash dividends to shareholders; after raising its quarterly dividend from $0.32 to $0.34 recently, the company was recently yielding 7.5%!

2. Efficiency, stability
Next, dividends should be attractive because they tend to be attached to relatively stable companies. Now, that might seem strange, given that (1) well-publicized failures Bear Stearns and Lehman Brothers were both dividend payers and (2) many "efficient, stable" dividend payers nonetheless lost 30% or 50% of their value last year.

While those are glaring examples of dividend burnouts, I believe they are exceptions to the rule. James Early, the advisor for our Motley Fool Income Investor service, recently cited an academic study with powerful conclusions:

[The study found that] earnings growth increased with dividend payout, right up to the highest payers having the highest next-10-year earnings growth. Scratching your head? So were many investors. Traditional wisdom was that companies paid dividends when they didn't have growth opportunities, not the other way around. But dividends can signal corporate health and force managers to allocate capital efficiently. (Emphasis added.)

Though there are always exceptions and occasional blowups, like those in the financial sector, it's kind of a given that a dividend will belong to a relatively stable company. After all, a company's management has to be pretty certain they can reliably pay out a dividend from their earnings before they commit to the payout to begin with.

Finally, it's important to pause and reflect on the difference between a stock's price and its value. If your stock has taken a 30% haircut over the past year, does that mean the underlying valueof the company also went down by 30%? Think of Coca-Cola (NYSE: KO), for example. Its stock has spent several years languishing (it beat the market last year but still fell), but throughout those periods, Coke has still been selling billions of servings of beverages in more and more places. It has grown morevaluable, and has kept paying out (and increasing) its dividend.

3. Cash today, more cash tomorrow ...
Dividends are also wonderful because they grow -- ideally along withthe share price, giving you a one-two punch. Check out the growth rates of these companies:

Company

Recent Dividend Yield

5-Year Dividend Growth

McDonald's (NYSE: MCD)

3.8%

32%

Norfolk Southern (NYSE: NSC)

2.8%

32%

AFLAC (NYSE: AFL)

2.5%

26%

Tyco (NYSE: TYC)

2.3%

27% Continued...