NEW YORK ( TheStreet) -- In the mid-to-late 1980s, Miller Lite had one of the best marketing campaigns of all time, where beer drinkers would argue about whether their beer had "great taste" or was "less filling."The stock market has caused a similar divide among investors -- growth vs. value. I happen to be in the value camp, a group that also appreciates companies like Apple ( AAPL) and Johnson & Johnson ( JNJ) that send out cash every quarter. On the flip side, you can argue for growth non-dividend payers like Google ( GOOG) and Netflix ( NFLX), where investors don't mind sacrificing near-term profits for a big pot of gold later. And therein lies part of the problem -- one hard to argue against. While dividend companies often carry higher prestige and offer an element of safety, growth stocks on average outperform dividend stocks. For instance, nobody is going to argue that Cisco ( CSCO) and Microsoft ( MSFT) are safer than Netflix. But Netflix, even with its high cost and weak margins, has posted gains of more than 400% over the trailing 12 months, whereas Cisco has gained 58% and Microsoft 38%. Those are not shabby number, but they trail Netflix by a huge margin. And I don't believe that there's a Cisco or Microsoft investor who wouldn't return every dividend check they have received in exchange for Netflix's 400% gain. Still, the argument toward dividend payers continues to be that "it's a smarter play." Well, avoiding a stock like Netflix doesn't seem to be so smart. Dividend shoppers -- myself included -- often pay more attention to valuation. We're not as aggressive as growth investors. And very seldom do we scratch the itch to speculate. That means although dividend investors might not have profited from Netflix's surge last year, they weren't hurt either when Netflix fell from $300 per share two years ago to $52. It works both ways. Growth investors, which I equate to the "great taste" crowd, shouldn't make the mistake in thinking that dividend investing is just about a quarterly cash payment. There's more to it than that. Not every dividend payer is a great investment. Dividend stocks fall into two categories: those with high yields but poor underlying businesses and those with strong businesses and potential.
Understanding the differences between these companies is as important as spotting a high yield. That is why a focus on valuation is crucial to the entire exercise. Many companies pay a dividend that have no business doing so. Hewlett-Packard ( HPQ), Intel ( INTC) and Dell ( DELL) are examples. While they offer decent yields, it's hard to get excited about their market potential. In fact, it would be in their interest to abort their dividend policies and preserve their capital for research and development. Suffice it to say, PCs are dying and not coming back. It would serve the interest of all three to invest more in mobile projects. By contrast, there's Apple, where you have not only a great yield at 2.62%, but also the strong growth opportunity. Although some Apple investors initially argued against the dividend, Apple's underlying fundamentals - unlike Dell's -- continue to improve. Accordingly, over time, Apple's free-cash flow growth should continue to support higher payouts, which is what Carl Icahn presumably couldn't ignore recently. In the meantime, I will continue to enjoy Apple's dividend check every quarter. But what will really matter to me is the total return. Since I know how to multiply, I won't mind the long-term waiting period. Unlike Netflix's quick rise, it may not taste great, but it's less filling. At the time of publication, the author was long Apple.. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.