If you're like me (and I hope you are), you want to build wealth for life by beating the market. You want to stay ahead of the masses who stash their money in savings accounts (gasp!), bonds, and even index funds. There's nothing worse than knowing you'd be doing better by doing nothing.

But you face the risk of losing to the market if you stash substantial portions of your hard-earned dollars in non-dividend-payers, underperformers, or -- worst of all -- non-dividend-paying underperformers. Because when your investment dollars stagnate, even the lowly T-bill will take you to the woodshed.

Greatest growth: Fueled by dividends
Master investors such as former Vanguard Windsor Fund manager John Neff knew that a solid dividend payer is a lifelong investment. During his 32 years at the helm, Neff beat the market by more than 3 percentage points each year on the back of dividends, earning an extra $175,000 on every $5,000 invested in his fund. That is a true dividend dynasty. And you, too, can build one.

Building your dividend dynasty
Wal-Mart has been one of the market's best-performing stocks, up nearly 100,000% since its initial public offering (IPO). And it's been paying and increasing its dividend ever since it first declared one in 1974. That's proof positive that a dividend doesn't hamper growth.

Another great long-term investment has been American States Water (NYSE:AWR), which has paid a dividend every year since 1931 and has increased its payout every year since 1953. Clorox (NYSE:CLX), another substantial outperformer, started paying a dividend soon after it came public in 1980, and it now boasts a 20-year compound annual growth rate (CAGR) of 15%. And then there's Emerson (NYSE:EMR), a company with 115 years of history, a 46-year track record of rising dividends, and a 15% CAGR during the past 20 years, which trumps the market's return over the same period. Not only did the dividends in these examples put money into shareholders' pockets, but they also indicated that management was confident in the future and that their respective business models were generating substantial amounts of cash.

These are good companies now, but years ago they could have been the foundation of your dividend dynasty -- a source of financial security for you and your family. Microsoft CFO John Connors expressed it best when he said, "Declaring a dividend demonstrates the board's confidence in the company's long-term growth opportunities and financial strength."

The secret to success
It may shock you to hear that the best stocks are not always those with the best products, the biggest revenues, or even the largest profits. The best investment opportunities are those run by managers who want to create maximum shareholder value. You'll find amazing winners among unknown payers such as Income Investor recommendation Pitney Bowes (NYSE:PBI), which has increased nearly 2,000% since 1985 -- and even more for folks who reinvested. Compare that performance to those of such big-name non-payers as AES (NYSE:AES), Chiron (NASDAQ:CHIR), and Liberty Media (NYSE:L). Pitney Bowes has offered marginally better total returns, but with much less volatility.

Great management can come from anywhere, and it is the backbone of a company with rising earnings per share, limited dilution, manageable debt, and a consistent ability to deploy capital and use assets effectively. That leads to the richest treasure of all: cash. And that allows a company to reward shareholders with a growing dividend. Say it with me now, "The dividend is key."

The cornerstones of tomorrow's dynasty
The stocks of tomorrow's dividend dynasty aren't just those paying substantial yields. (If that were the case, wouldn't everyone and his or her broker be building one today? The answer is yes.) Tomorrow's dividend dynasties are both dividend and capital gains growth opportunities. They're:

  1. Underfollowed.
  2. Undervalued.
  3. Underappreciated.
  4. Committed to creating shareholder value.

Search for these four simple traits, and don't ignore boring industries -- utilities, insurers, consumer products, banks -- or even foreign countries. Your dynasty awaits.

Mathew Emmert -- who puts this strategy to work each and every day for his Motley Fool Income Investor subscribers -- is besting the market by 3 percentage points with less volatility. To view more than 50 of Mathew's favorite income stocks, be his guest at Income Investorfree for 30 days. There is no obligation to subscribe.

This article was originally published on June 29, 2005. It has been updated.

Tim Hanson does not own shares of any company mentioned. Microsoft is a Motley Fool Inside Value recommendation. No Fool is too cool fordisclosure... and Tim's pretty darn cool.