Here are some tips on how to go about selecting them now:

1. LOOK TO DIVIDEND ‘ARISTOCRATS’ AND BEYOND. When in doubt, it’s always wise to go for quality. Companies that have maintained their records of consistent cash dividend payouts through the recession may be a good place to begin.

The list of “dividend aristocrats,” members of the S&P 500 that have 25 consecutive years or more of increasing their dividends, is fast shrinking. Six companies-BB&T Corp., Gannett Co., General Electric Co., Pfizer, State Street Corp. and US Bancorp-of the 52 that made the annual list for 2008 have decreased their dividends this year, and at least as many others appear likely to fall off the 2009 list.

You may want to broaden the parameters to consider smaller companies and others with a strong dividend history. Silverblatt suggests as a possible starting point those among the largest 1,500 companies that have paid increasing dividends over the past 10 years, earned twice what they paid out in 2008 and are estimated to make at least twice their current dividend for 2009. As of mid-June, that included 81 companies.

2. SEEK STOCKS WITH HIGH RETURN ON EQUITY. It can pay off to look at your stock candidates’ ROE, which is an indicator of quality and cash flow.

Schwab Equity Research reviewed stocks’ return on equity from 1990 to early 2009 and found that those in the lowest 20 percent were twice as likely to cut their dividend as all the others. Similarly, those with the highest 20 percent ROE were twice as likely to boost their dividend.

What that means is that stocks with high return on equity are more profitable and likelier to have the cash to cover dividends.

“By looking at the stocks with the highest return on equity, you probably improve your chances of avoiding a dividend cut and of getting a dividend increase,” said John Wightkin, director of equity research applications for the equity research team, part of discount broker Charles Schwab & Co.

Return on equity is calculated by dividing a company’s net income by its common shareholders’ equity.

3. BEWARE OF COMPANIES THAT OVERPAY INVESTORS. It may sound counterintuitive, but don’t look for too great a deal.

The lower the payout ratio-the percentage of a firm’s profits that is paid out to shareholders in the form of dividends-the safer the dividend is likely to be. Beware when you see companies paying out 70 percent or 80 percent, according to Peters, because it surely can’t last.

The same applies to yield. A stock that sells for $30 and pays an annual dividend of $3 per share has a yield, also called dividend yield, of 10 percent. But any double-digit yield on a stock in this market may be too good to be true for the long haul.

The S&P 500 has a current yield of about 2.4 percent, very low by historical standards. Investors should be seeking a stock with a yield of 3, 4 or 5 percent at the moment, according to Peters-not spectacular but able to be grown over the long term.

4. WATCH FOR KEY SIGNALS THIS QUARTER. Doing your homework means keeping an especially close eye on companies over the next couple of months, and perhaps waiting for those signals before buying.

First off, corporate earnings reports, which begin in earnest in mid-July, will provide evidence of whether cash flows are improving yet. So far this year, companies’ earnings have gotten better but cash flow has not.

Silverblatt thinks the next thing to watch for will be in the latter part of the quarter when companies start to plan their budgets and expenses for next year. “We think August and September is going to be a key time in the marketplace,” he said. “If companies don’t see a better 2010, they’re going to cut their dividends.”

5. BUY BASICS. Since a return to boom times seems unlikely soon, it’s a good idea to stick with companies that make essentials in this economy.

“You want to be in things that people need, not that they want-packaged foods, utilities, pipeline stocks, health care,” said Peters.

Following all the expert advice is hardly a guarantee of dividend investing success, of course. But true believers in dividends have faith that this period of terrible results will prove to be only a blip in their strong historical performance.

That’s why Bob Blanchette, a fellow Oklahoma retiree with Hoffman, is doing his dividend homework with more interest than ever.

“I think this ugly environment provides an excellent opportunity to buy dividend stocks,” said Blanchette, 61, of Moore, Okla. “Where else can you get 5 percent yield on your money? If you are an investor and not a trader, then buy value.”

The Associated Press

by DAVE CARPENTER

Dividend Stocks: Basic information to get you started.

Dividends are an additional amount that an investor receives when the stocks or bonds that they are invested in perform well enough so that they can give a profit to the company the dividend stocks were issued from. Many companies pay dividends based on a portion of their profits, which is that portion divided up among those who have invested it in their stock. These companies do this to share their profits with those who buy stock and help them stay in business and as a thank you to their investors. Please understand the basic stock investing concepts when researching dividend stocks.

Dividend stocks are less volatile due to the fact that companies that pay out cash result in investors more willing to hold dividend stocks through bear markets. Dividend stocks tend not to rise as quickly as non-dividend stocks during roaring bull markets. Dividend stocks also do not fall as far as rapidly as non-dividend stocks. Investors are now looking for downside protection due to slow economic growth.

Dividends are paid on earnings per share meaning the more shares of a particular stock that you have the more you will receive when dividends are paid. This normally occurs quarterly, during earnings season, and when businesses report earnings and profits or losses on dividend stocks. Some dividends are paid on certain bonds or other investment options that are done through a money market account. These dividends are a form of interest for the investment. In most cases, dividends are paid into a money market account so that you can withdraw them reinvest them.

Dividend stocks get favorable tax treatment. Thanks to a change in a tax law in May, 2003, most dividend stocks are taxed at only 15%, however, previously, dividends were hit at full income-tax rates. This means that investors may get additional current income from a high-yielding dividend stock than they would in a money market account or a COD (Certificate of Deposit) as part of their investing strategy. The tax change has generated savings for individuals so far totaling roughly $30 billion. When the tax break expires in 2008, some investors project that it may be stretched out longer. This should provide savings to investors that will exceed and estimated $100 billion.

Dividend stocks dividend yield: The dividend yield is a company’s subsequent 12-month dividend(s) divided by the company’s current share price. Higher payouts increase the yield and the dividend hike usually increases the share price. Companies whose stock price history demonstrates strong dividend growth are typically committed to continuing that strategy. Do your research on dividend stocks to find out which companies do not consistently increase dividends because they prefer to use their spare cash for other reasons.

Please note that high-yielding stocks are high because many investors see them as risky, and as a result, are not always the preferred choice. You want the dividend stocks high, but not too high of a stock market risk. Buying pressure will often push the share price up only until the yield drops back down closer to more realistic market sectors stock rates. Some investors will set their maximum acceptable dividend yield at 5 percent, as a guideline. Others will push to a maximum of 8 percent for riskier dividend stocks.

Reinvesting dividends is a relatively easy way to make additional income off of dividend stocks (a particular stock) or investment. The investment is doing well enough to be paying dividends, and the reinvestment means that you have more of the stock than you did previously. It is also just as wise to choose not to reinvest your stock dividends. This is most likely true when you are holding a balance in your money market account to take advantage of a high interest rate that’s being paid to it. It is also true when you are receiving dividends from short-term investments that you plan to cash out soon.

Right now is not the time to wage heavily on banks when dealing with dividend stocks. Strong banks have been fine dividend-payers in recent years, however with rising interest rates, mortgage profit margins are pinched, and the demand for new mortgages is decreased. It is proving okay, however, to work with small or regional banks which have proven to provide outstanding strong profits from servicing and making home mortgages.

There are many additional resources you can utilize when beginning investing in the stock market. Please be sure to do your research!