Category 1 Stocks

We're ankle-deep in hurricane season right now. Even if you don't live in the susceptible Southeastern part of the country -- like me -- you have probably learned enough about these fierce windstorms, given two straight years of headline-hogging storms.

What about your portfolio? Is it built to weather the fury of a hurricane? If you haven't noticed, we've been running a few commentaries this month with the general theme of planning for adversity. A few that you may have enjoyed include:

• Planning for the Unthinkable
• Disaster-Proof Your Prized Possessions
• Plan for All Seasons

The point is that preparing for a wicked storm isn't all that different from gearing up to face whatever the market throws your way. It's in that spirit of financial preparedness that I'm about to break up our five stock-based newsletters into storm categories. We'll start today with the steadiest of the lot -- income-producing securities -- and work our way up to the high risk-reward ratio that one can find in high-octane growth stocks by the end of the week.

Yielding to high-yielding stocks
Category 1 storms are the tamest of the named storms, so it's only natural that we begin with Mathew Emmert's Income Investor newsletter service.

Just five of the 70 stocks that Mathew has singled out are currently trading for more than 20% below their original recommended price. That's clearly a credit to Mathew's knack for selecting fairly priced equities, but let's not dismiss the beauty of dividend-paying securities in bearish markets.

Let's use an example right out of Mathew's scorecard. Tupperware (NYSE:TUP) is a name you're probably familiar with. Maybe you've been to a Tupperware party set up by a family friend who's one of the many commissioned consultants for the company. Either way, your kitchen probably has an airtight food container or two that is Tupperware's handiwork.

The key here is that Tupperware presently yields 4.6%. All things being equal, if you buy $1,000 worth of Tupperware stock, you stand to receive roughly $46 in dividends over the course of the year.

That's not too shabby. It's actually more than competitive with many of the leading money market funds out there at the moment. In this occasionally cruel market, you've probably seen stocks shed half their prices without a shift in their fundamentals, right? If the same thing were to happen to Tupperware from today, the stock would be yielding a whopping 9.2%. It can happen, but it's unlikely, given the influx of investors who would support the shares in pursuit of the relatively beefier dividend checks.

Tupperware's fundamentals can fall apart. Its cash flow can suffer to the point that it can no longer support its impressive dividend. These are all things to watch out for, certainly, but as long as the company holds its own, it's less likely to be swayed back and forth like the market's countless other non-dividend-paying stocks.

Weathering the storm with quarterly dividend checks
Dividends are often seen as a zero-sum game. As stocks go ex-dividend, the share price is adjusted downward to reflect the amount of the distribution. It's money out of the company's coffers and into the waiting hands of its investors.

Only it's not a zero-sum game. Dividends can be flotation devices. Perhaps this year has been pretty rough on your portfolio. Some stocks just haven't been holding up all that well since the market has come barreling down off its spring-time highs.

It's a grim scenario, but you'd be surprised at how well some dividend-producing stocks have been performing. Let's take a look at some of the names you may recognize that have fared well so far in 2006 and that have fat yields to show for it.

You may know all about the Books-A-Million superstore chain. You may even drive a GM car. ONEOK may be the one name that you're not familiar with, but the natural gas distributor is no stranger to Income Investor readers. Mathew singled out the stock in the December issue, with ample time to let readers in on this year's refreshing advance.

That's what Category 1 investing is all about. It's about riding the historically superior returns of the stock market and sidestepping some of the riskier entities that can score huge gains in a little amount of time, but can just as quickly wreck your portfolio if you don't have the mettle to see it through the malaise.

I consider myself an aggressive investor, but I have no problem buying into Mathew's philosophy. I'm an investor in Cedar Fair (NYSE:FUN), the amusement park operator that he recommended to subscribers last summer. As far as industries go, running thrill parks can be pretty wild, but Cedar Fair has been a superbly run organization over the years and has a juicy 7.4% yield that should prove to be very fun for investors' portfolios.

Yield to yield signs? You bet. It's a great way to ride out the storm. Come back tomorrow when I take a closer look at Category 2 stocks -- value stocks.

Are you a Category 1 investor? Give Income Investor a spin with a free 30-day pass to see whether Mathew's stock-picking style is right for you.

Tupperware, ONEOK, and Cedar Fair are all Income Investor selections.

Longtime Fool contributor Rick Munarriz pays attention to yield signs. He does own shares in Cedar Fair. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.