In times like these, we are all trying to find safe investments that will protect us from today's markets. High-yielding stocks are an attractive alternative for many investors. Especially when one considers that dividends are a major part of earning good overall stock market returns. For instance, from 1926 to 2006, dividends accounted for 41% of total stock market performance.

OK, I get it. Dividends are good.
However, the lure of a high dividend yield can be dangerous. The dividend may not be safe. Usually the dividend yield increases because the stock price decreases. A decrease in price can be a sign of trouble within the company that could potentially imperil the dividend. Therefore, investors need to examine the underlying business that supports the dividend.

We will first use the Motley Fool CAPS screener to identify a few stocks awarded four and five stars (maximum) by the 115,000-plus member CAPS community that have dividend yields between 5% and 10%. The highest-rated stocks in CAPS have had stellar records, so we'll concentrate only on those. Then, we will examine them for signs of dividend stability.

Company

CAPS rating

Dividend yield

Dividend payout ratio

Altria (NYSE: MO)

*****

6.3%

76%

AT&T (NYSE: T)

****

5.7%

68%

Duke Energy (NYSE: DUK)

*****

5.3%

67%

Pfizer (NYSE: PFE)

**** Continued...