Our exploration of the market's 10 best and 10 worst stocks of the past decade has uncovered some surprising names, but the results confirmed what we already suspected -- small caps offer the highest risk and highest reward in the market.

But with the extremes out of the way, we wanted to know: What were the 10 most mediocre stocks of the past 10 years?

The middle ground
For the purposes of this study, we're defining "mediocre" as stocks trading for nearly exactly what they were last decade. These are companies that barely budged at all, despite the incredible rise and spectacular fall of technology, the terrible events of Sept. 11, the revelations of widespread corporate fraud, and even the birth of Brangelina's kid.

The results, without further ado:

Company

Market Cap
(in Millions)

Price Change,
6/13/96 to 6/13/06

5-Year
Beta

AM Castle
(AMEX:CAS)

$421

+0.04%

1.4

Micron Technology (NYSE:MU)

$10,237

+0.10%

2.8

Valeant Pharmaceuticals (NYSE:VRX)

$1,628

(0.25%)

2.2

Progressive Gaming International (NASDAQ:PGIC)

$319

(0.27%)

2.3

Horace Mann Educators
(NYSE:HMN)

$713

(0.27%)

0.8

Human Genome Sciences
(NASDAQ:HGSI)

$1,318

+0.30%

1.9

Viad (NYSE:VVI)

$666

(0.41%)

0.9

Noven Pharmaceuticals (NASDAQ:NOVN)

$395

(0.54%)

0.8

Kforce
(NASDAQ:KFRC)

$536

(0.55%)

1.9

Intevac
(NASDAQ:IVAC)

$394

+0.67%

1.4

Data courtesy of Capital IQ. a division of Standard & Poor's.

Making sense
This is a diverse bunch of companies. There's a tech giant (Micron), a biopharmaceutical company (Human Genome Sciences), an event services company (Viad), and even a staffing specialist with a cool name (Kforce). There's no unifying industry or trend among the group.

We must own up to it: To say that these haven't budged over the past decade (as we did earlier) is just a bold-faced lie. (Sorry about that.) Eight of these 10 companies were more volatile than the market, and some, like Micron and Progressive Gaming, were alarmingly so.

So, then, what do they have in common? Actually, not a whole lot. But that doesn't mean there's no lesson here.

When flat isn't flat
Four of these 10 "mediocre" stocks pay a dividend; the yields range from the solid (2.5% for Horace Mann) to the paltry (0.9% for AM Castle). Nevertheless, the dividend means that shareholders earned something even though the stock price hardly budged.

Merck (NYSE:MRK) illustrates this point brilliantly. Although Merck was not one of the 10 most mediocre stocks of the past decade, it was painfully mediocre nonetheless (it did rank in the top 25). Since 1996, Merck's stock has gained just 3.6%.

Investors, however, did much better. Adjusting for dividends, Merck stock has actually returned 45% for investors. That's not great on an annualized basis -- just 3.8% -- and it trails the return of the S&P 500 by 2 percentage points.

But the combination of a strong business and a dividend has protected long-term Merck investors on the downside even as the company has struggled to cope with one of the most controversial developments in its history -- the death of Vioxx patients, the withdrawal of the product, and the massive lawsuits that followed.

That's worth repeating: Long-term Merck investors can point to investment gains even while the stock has been decimated by the massive threat of litigation. Wow.

There's more
But it doesn't end there. Folks who have been reinvesting their dividends along the way have built up a substantially larger stake in the company. With a $10,000 investment in 1996, you'd own 312 shares today. If you reinvested along the way, you'd own 418 shares. And while the rewards from that ownership stake aren't immediately evident given Merck's turmoil, imagine a scenario in which Merck's stock rebounds 25%.

With the stock trading up to $42.46, your 418-share position would be worth $17,748. If you'd never reinvested dividends, your position would be worth just $13,247. If the stock rises another 25%, the spread increases to $22,185 versus $16,559. The greatest rewards will go to those who had regularly reinvested their dividends at the lowest prices.

Making up for mediocrity
This is why Wharton professor Jeremy Siegel calls dividends a bear market protector and a return accelerator. Simply put, they can protect you from an unforeseen calamity.

And that's good. The stock market is unpredictable. When even a formerly steady blue chip such as Merck can produce a decade of zero returns, you can be sure that there are no sure things in the market.

In fact, it's a tribute to the power of dividends that the Vioxx effect hasn't been worse for Merck investors. The dividend strategy protects against disaster and offers a steady return along the way, helping individuals beat the market with less volatility. That's why Fool analyst Mathew Emmert exclusively recommends dividend-paying stocks, including Merck, in his Income Investor service. To get started with this strategy and to view more than 50 of Mathew's favorite dividend-paying stocks, click here to join Income Investor free for 30 days.

Tim Hanson and Brian Richards have been known to overuse the phrase "it will pay dividends." Neither Tim nor Brian owns shares of any company mentioned in this article. The Fool's disclosure policy never rests -- not even to watch the World Cup.