Your friends don't get your portfolio, do they? Not if you're a contrarian. If you're a contrarian, people laugh at your investing ideas.

Buy stable companies you understand? Don't you know alternative energy is the next hot thing?

Buy companies that are undervalued? Don't you know the market is exploding and you should get out while the getting is good?

Laughing at contrarian ideas is safe; the current headlines always support the herd. But those people won't be around to apologize when you're proved right a year, two years, or 20 years down the road.

You're not alone
The investing world laughed at Warren Buffett in 1999, despite his having proved himself across decades. Through Berkshire Hathaway (NYSE:BRK-A), he held old-economy stocks such as Coca-Cola (NYSE:KO) and Gillette, now part of Procter & Gamble (NYSE:PG). Meanwhile, those in the know bought up any company with a story and a ".com" at the end of its name.

They chuckled at this old man who couldn't adapt. How could he invest in soda and razors when the Internet was changing the world? Could he even use a microwave or program a VCR?

Their proof was in their daily stock quotes. In weeks and months, they were making gains that he took years and decades to match.

Until it all fell apart, that is. Once the bubble burst, those in the know sold their shares of (Ticker: YUCK) for what they could and left Buffett alone. And through it all, he kept on buying the same kinds of stable companies at a discount.

The song remains the same
The saddest part of this story is that most of us never learn. How soon after the Internet bubble did we have a housing bubble? And how soon after the housing bubble did the current oil and commodities bubble start?

The hype is compelling -- but it never lasts. When bubbles burst, the irrational exuberance becomes irrational pessimism. The same people who said housing prices would never fall are the same people now saying this recession will never end. Wrong. And wrong again.

When conventional wisdom spouts doom and gloom, prices fall. Hard. Irrationally hard. And that's when contrarian wisdom tells you to buy.

A lucrative contrarian play
The wise contrarian looks for great companies that are selling for temporarily great prices -- and the beauty of a recession is that those opportunities are everywhere. But there's another beauty as well: Because of falling stock prices, companies that were paying nice dividend yields are now sporting monster ones.

Dividend-paying stocks aren't sexy in any market. Stodgy and stable they may be, but S&P 500 dividend payers, as a class, outperform S&P 500 non-dividend payers by 6 percentage points per year -- and during bear markets, they outperform non-dividend-payers by an additional 1% to 1.5% per month.

And even if their stock prices go nowhere until the recession is over, hefty yields provide some nice returns in the meantime. Take a look at some that have caught my eye recently: Verizon's (NYSE:VZ) 4.8%, Bank of America's (NYSE:BAC) 7.8%, General Electric's (NYSE:GE) 4.3%, and Pfizer's (NYSE:PFE) 6.7%. Each of these yields is far in excess of the -12% return of the S&P 500, and they give investors a nice hedge against market fluctuations as this recession works itself out.

Combined with the beaten-down stock prices, dividend yields like this seem like a clear signal for contrarians looking to buy great companies at good prices. But before you invest, you have to answer two questions: Are these truly great companies at great prices? And are the dividends sustainable?

The difference between a contrarian and a naysayer, after all, is research and thoughtful analysis -- not simply opposing oneself to conventional wisdom.

The Foolish bottom line
Conventional wisdom would say this is the time to get out of the market -- and conventional investors are obeying. July saw a net $26 billion leave stock mutual funds, for a net $47 billion in outflows year to date. Contrarian investors, on the other hand, know this is the time to get in -- to good companies at great prices sporting strong and sustainable dividend yields.

If you want some help, contrarian investors James Early and Andy Cross are separating the true dividend-paying bargains from the value traps in our Motley Fool Income Investor service. They pore through a company's filings, seek out competitive advantages, and vet potential picks with their proprietary models. In short, they find great companies at great prices -- with strong, sustainable dividends. For a look at the companies they recommend now, take a free 30-day trial. There's no obligation to subscribe.

Anand Chokkavelu owns shares in Pfizer but in no other company mentioned. Pfizer and Bank of America are Motley Fool Income Investor recommendations. Pfizer, Coca-Cola, and Berkshire Hathaway are Inside Value choices. Berkshire Hathaway is a Stock Advisor pick. The Motley Fool owns shares of Berkshire Hathaway. The Fool has a disclosure policy.