If you're like me, 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. You certainly don't want to lose to them. There's no feeling worse than knowing you'd be doing better by doing nothing.

But you take on 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.

The greatest growth is fueled by dividends
Master investors like former Vanguard Windsor Fund manager John Neff knew that a solid dividend payer was a lifelong investment. During his 32 years at the helm, Neff beat the market by more than three percentage points each year on the back of dividends. That's a true dividend dynasty -- and you can build one, too.

Building your dividend dynasty
has been one of the market's best-performing stocks, up nearly 100,000% since its 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 PPG Industries (NYSE:PPG), which has paid a dividend every year since 1899, and has increased its payment every year since 1971. And then there's McDonald's (NYSE:MCD), a company with almost 60 years of history, which started paying a dividend in 1976. In the past three years of its more than three decades paying dividends, McDonald's has nearly doubled its payout.

The dividends in these examples did two things. First, they put real money into shareholders' pockets. Not promises, but cold hard cash. They also indicated that management was confident that its business models were generating substantial amounts of cash.

Twenty years ago, these companies could have been the foundation of your dividend dynasty -- a source of financial security for you and your family for years to come. Former 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 create maximum shareholder value. You'll find amazing winners among unknown payers such as Income Investor recommendation South Jersey Industries (NYSE:SJI). The boring old natural gas company has returned more than 18% per year over the past 10 years. Compare that performance with that of such big-name non-payers as Sanmina-SCI (NASDAQ:SANM), Powerwave Technologies (NASDAQ:PWAV), or even behemoth Corning (NYSE:GLW), which after many years of paying shareholders suspended its dividend in 2001 (though it's worth noting that the company reinstated a quarterly payment this past summer). These three tech companies haven't offered the same returns, yet have been far more volatile.

A company with steadily rising earnings per share, limited dilution, manageable debt, and a consistent ability to deploy capital and use its assets effectively will lead investors to the richest treasure of all: cold hard cash.

The cornerstones of tomorrow's dynasty
The stocks of tomorrow's dividend dynasty aren't just paying substantial yields. If that were the case, everybody and his broker would be building one. Tomorrow's dividend dynasties are like National City -- both dividend and capital-gains growth opportunities. That means they're:

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

Search for these traits, and don't ignore boring industries -- utilities, insurers, consumer products, banks -- or even foreign countries. That's how James Early and Andy Cross do it, and their subscribers are beating the market by five percentage points, with less volatility and business risk.

To view their favorite income stocks, enjoy a free 30-day trial of Motley Fool Income Investor.

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

Tim Hanson does not own shares of any company mentioned. PPG Industries is an Income Investor recommendation. Wal-Mart and Microsoft are Motley Fool Inside Value recommendations. No Fool is too cool for disclosure.