In addition to reporting another solid quarter on Wednesday, tobacco maker Reynolds American (NYSE:RAI) also announced that it had upped its quarterly dividend by 13.3%, pushing the stock's dividend yield to 5.45%. The stock is down slightly since the beginning of the year, but after days like yesterday in which the roof essentially caved in on the market, the stability and consistency that any of the tobacco stocks can bring to one's portfolio makes them begin to look all the more attractive.

Bears essentially ran roughshod over the market from 2000 to 2002, yet shares of Reynolds American appreciated more than 50%. The S&P 500 was down approximately 40% over this same time period. I am certainly not suggesting that we are about to enter a sustained downturn in the market. I do think, though, that vice stocks such as tobacco, gaming, etc., offer a great hedge in down markets. They haven't fared too poorly in good markets, either. The Vice Fund (FUND:VICEX) is up 22.5% over the past 52 weeks.

For its Q2, Reynolds did report a decrease in its adjusted EPS of 9.8% compared to the prior year. But Reynolds has positioned itself for a strong finish to 2007, seeing "growth [from] key brands" and making "full-year productivity gains of $75-to-$100 million." The company is expecting earnings to kick up in the second half of the year and has raised the lower end of its earnings guidance by $0.05 per share.

The company has experienced volume declines similar to those of competitor Altria (NYSE:MO), but Reynolds American has seen margin improvement from pricing and significant contributions from Conwood, which it acquired last year. As the result of not only improving margins, but also rising volume, pro forma operating income from Conwood increased by 15.6% over the last six months compared to the prior-year period.

Company management now expects a 9% to 12% improvement in full-year earnings. The consistency of the company's earnings growth, along with an impressive dividend yield, make this stock worthy of consideration for Fools who are concerned about a market correction -- or those just looking to add some stability to their portfolio.

Looking for other high-dividend-yield stocks to pad your portfolio's returns? Motley Fool senior analyst James Early will show you the way with a free trial of our Income Investor newsletter. The Income Investor portfolio is currently outperforming the market by 5%. Just take a free trial today to see what all of the recommendations are.

Fool contributor Billy Fisher does own shares of Reynolds American and Altria. The Fool's disclosure policy is smoke-free.