Find Solid Dividend Plays Like PetroChina, Linn Energy

This was originally published on RealMoney. It is being republished as a bonus for TheStreet.com readers.

In investing, a little means a lot. With no definite end in sight for declining real estate values and major financial institutions continuing to write off billions in loans, the key to beating this market is to get through this storm relatively unscathed.

Equity dividends offer one intelligent way to protect your portfolio from the perils of both declining equity prices and creeping inflation. While no investment should ever be made on the basis of dividend yield alone, dividends can play a substantial role in determining the value of your assets over the long term.

Consider what the typical 2% to 3% dividend yield can mean over 10 years: $100,000 that earns 11% per year over 10 years is worth about $284,000, while $100,000 that earns 13% over 10 years is worth about $340,000.

With savings rates currently paying less than the current rate of inflation, savings accounts are actually paying you a negative real rate of return. And with the recent shutdown of several apparently sound banks, it would seem that putting your money under your mattress is your best bet. This is hardly the case.

Even amid the chaos circling the stock market, plenty of very well capitalized solid companies are currently paying dividends that far exceed bank rates, U.S. Treasuries and the general rate of inflation. And the best part: Most of these businesses are trading at attractive prices today, enabling the patient investor to benefit twice: from the equity price appreciation and from the dividend payment.

And no, I'm not talking about the likes of Bank of America(BAC Quote - Cramer on BAC - Stock Picks), which currently sports a dividend yield of 8.3%, or Citigroup(C Quote - Cramer on C - Stock Picks) with its 6.9% yield. These institutions are currently paying yields that are unsustainable; Citi has already announced dividend reductions, and as the banks work to improve liquidity, the common equity dividend payment will be the first to go.

Check the Underlying Business

Dividends count, but only when they can be counted on. And as always, any investment should be made on the merit of the business first. A dividend yield of 8% means very little if the stock price declines 50%, because the underlying quality of the business has deteriorated.

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