"The market's dangerous."
"The market's gonna crash."
"The market will take your lunch money."

Thus spake the soothsayers from Wall Street. And to them, Motley Fool Income Investor has replied with a resounding razz: "Thphbbbbbt!"

For nearly two years now, Income Investor has walloped the market's returns by a 2-to-1 margin, generating 14% in total returns for our subscribers. And that isn't even the point.

Then let me clarify. Yes, the stock market is a dangerous place. And, yes, the price of stocks can wobble considerably from day to day. But if you're investing for income, that shouldn't matter a bit. Because quarter in and quarter out, year in and year out, if you stick to a dedicated program of "investing for income" -- for dividends, to be exact -- you can continue to receive the same payout you initially bargained for, no matter what the market does.

That's what sets income investors apart from the go-go growth crowd. The pinstripe-suiters and the day-trading masses madly chase capital gains from tech stocks such as Advanced Micro Devices (NYSE:AMD) and Google (NASDAQ:GOOG), oblivious to the fact that they could be paying twice the taxes on those gains than those charged on dividends. And that's fine. If they want to chase companies fetching P/Es in the upper-double and triple digits, let 'em. We already saw that film, back in March 2000, and we already know the ending.

Income Investors, in contrast, are bargain hunters. We're consistency lovers. We buy into a company only when it shows us the money -- day in and day out, and not some indeterminate day in the future when the pie meets the sky.

Sounds good. So how's it work?
Fine. You want specifics. So let's break the world down into two kinds of investors -- we'll call them "Jack Growth" and "Jill Income" -- and see how they fare in two kinds of markets, bull and bear.

Jack, our go-go growth investor, buys a company such as Ciena (NASDAQ:CIEN), which has huge potential if the telecom industry picks up tomorrow, but pays no dividend today. Say he pays $5 for a single share in the middle of a bull market. Over time, that share doubles in value to $10, at which point Jack sells for a $5 profit, on which he pays a marginal tax rate of up to 35% (meaning his actual profit could be as little as $3.25).

In a bear market, in contrast, Ciena could fall to, say, $2. If Jack panics and sells then, his profit would be zero, his taxes would be zero, and his loss would be $3.

Now for the good news...
In contrast, Jane Income doesn't pay so much attention to the stock price. She's more fixated on generating a dependable payout from her investment, in good years and bad. So Jane buys a stock like Income Investor pick Unilever (NYSE:UL). It's a big, stable company that "isn't going anywhere fast," but, on the other hand, "isn't going anywhere anytime soon."

Again, Jane isn't too worried about the former, and is actually pretty reassured about the latter. As long as the company stays in business, and maybe grows a bit over time, that's fine by her. What's of critical importance, however, is that the company regularly pays out a fat 5% annual dividend. And that she's paying just 15% in taxes on her dividend, in contrast to a marginal tax rate on capital gains that can range as high as 35%.

So if Unilever's stock doubles in value, great. If it falls by half, not so great -- but not a disaster, either. Because Jane gets her guaranteed payout either way. She's getting paid to wait for better days, secure in the knowledge that, historically, the stock market rises by about 10% per year over the long haul, and that what's gone down today will in all likelihood eventually come back up.

How to get the job done
At Income Investor, we don't just help our subscribers find companies that pay fat dividends. We also guide them toward financially sound investments that generate stable free cash flow to finance those dividends. Finally, we seek companies that are selling at a discount to their intrinsic value, so as to minimize the chance that the stock will decline in price in the short term and maximize the likelihood that it will increase in value over time.

In short, at Income Investor, we have three primary goals. We want to:

  • Help you preserve your savings
  • Ensure that they earn you better-than-average income
  • Maximize your chances of eventually receiving "free money"

Let's go over those in order.

Wealth preservation
As we discussed a couple of weeks ago, putting your life savings in a bank guarantees that you will lose money over time through a combination of inflation and taxes. To avoid that guaranteed loss, the safest place to put your long-term savings is in the common stocks of high-quality companies.

There is, however, a catch. Stocks as a class aren't guaranteed to suffer the continuous erosion of value that savings deposits endure. But stocks certainly can lose value -- and unlike a savings account, your investment in a stock is not insured by the federal government. When you buy an Enron and it goes "poof," it takes your savings with it. Similarly, if you buy stock in Elan (NYSE:ELN) and the company has a bad drug day, no one's going to make good on your losses.

That's why it's essential to do your homework before investing in any company's stock -- to ensure that your potential investment is under competent and honest management, that it sports a strong balance sheet, that it consistently generates copious amounts of cash.

And that's why we insist that any company we recommend possess all of the above.

Better-than-average income
The average S&P 500 stock currently pays a dividend of about 2%. But we can do better. Among the companies recommended by Income Investor over the past two years, the average dividend payout is closer to 4.4% -- more than twice as good.

What's that? You say you can get 7.5% by buying General Motors (NYSE:GM)? Ah, but GM is also threatened with having a good chunk of its $300 billion in long-term debt downgraded to "junk bond" status. We don't need that kind of risk. What's more, last month we recommended that our subscribers invest in a sturdy British water utility that offers substantially less risk of loss than does GM, while paying you an equivalent dividend.

Free money
As income investors, our primarily goal is -- surprise! -- earning income from our investments. Still, we won't pass up the chance to buy a dollar for $0.80 while we're at it. Call us thrifty, call us cheap -- but we simply refuse to pay full price for a company. Not when we know that, by putting forth just a little extra effort, we can find you a generous dividend payer at a bargain price.

The aim here is not just to earn you a hefty dividend, paid regularly whether the market goes up or down. We also want to maximize the chance that your investment principal will increase when Wall Street discovers your stock's true value. Time and again, we've discovered companies such as TXU (NYSE:TXU) that not only pay an above-market dividend but also sell for substantially less than their true worth. Not all of our picks rocket 32% in six months, as TXU did. But because we're buying them at a discount to their intrinsic value, all of them have the potential to do just that. When they do, that's free money for you.

And speaking of free, how'd you like to take a peek at all 40 of our past recommendations and read the full story on how we found each of them -- all completely free of charge? You can. Just sign up for one free month of Income Investor. It's our way of saying thanks for giving us a chance to convince you of our service's value. While we hope you'll stick around and become a paying member of our Foolish investing community, there's no pressure. Stay if you like. Leave if you don't. And don't pay a dime for any unused portion of your membership. You have our word on it.

Fool contributor Rich Smith has no position in any company mentioned in this article. The Motley Fool's disclosure policy pays dividends in good times and bad.