Just when you think Mr. Market couldn't do you much worse, he goes and spits in your Cheerios.

See, stocks struck me as extremely attractive as recently as a week and a half ago. At that point, the S&P 500:

  • Was down around 20% -- from late 1997
  • Was yielding 3.4% -- around an 18-year high
  • Had a price-to-operating earnings ratio -- 12.4 -- at a 19-year low

Naturally, the Gods mocked me by driving the market up 19%.

Between this spurt and the economic bellyache heard 'round the world, I was forced to circle back to my central question: Is this still a good time to buy stocks? And if so, what should you buy?

The truth
Before we get to whether I think this is a good time to buy stocks, let me tell you what I'm not saying: I'm not making any argument about whether or not this is the bottom.

Here's the real deal: No one -- not Warren Buffett, not Meredith Whitney, not even your uncle who wears a Simpsons T-shirt and camo pants each Thanksgiving -- has any realistic insight as to where the market is headed over the next several months. The economy? Sure. The market? No.

See, the stock market tends to act as a leading indicator to the broader economy. In English, that means that the market tends to rise before the economy turns north, and fall before the economy turns south. Blend in historic volatility, and voila -- the task of predicting the market's short-term moves goes from impossible to even more impossible (if that's possible).

So I'm not predicting the bottom -- but I do think this is a good time to buy stocks.

Why buy?
Even though the market could fall further, the long-term prospects for investments look reasonably rosy.

  • World leaders are pulling out nearly all the stops to prevent a catastrophic depression.
  • Energy prices have fallen precipitously over the past couple of months.
  • And my favorite -- dividend yields are very high, and, according to the University of Chicago's John Cochrane, stocks tend to deliver stellar returns over the seven-year period following one when dividend yields are high.

I'm sure you can guess what I'm going to suggest next: If you want to play this market, go after solid, sustainable, dividend-paying stocks.

It's true that dividend-paying stocks are my answer for nearly every market environment. Not only do they hold up better in bear markets and pay you to wait while the economy works out its kinks, but they've also significantly outperformed non-dividend payers over the long haul. Indeed, Jeremy Siegel found that from 1957 through 2003, portfolios invested in the highest-yielding S&P 500 stocks outperformed portfolios in the lowest-yielding by almost five percentage points a year.

My answer for this market
So where should you look for dividend payers in this market? Blue chips like Yum! Brands (NYSE:YUM), PepsiCo (NYSE:PEP), and Coca-Cola (NYSE:KO) are all yielding near 3% -- nearly unheard of. Each should experience solid growth over the next half-decade including multiple expansion. Meanwhile, with a dividend that could easily double over the next seven years, cash-rich and globally diverse Philip Morris International (NYSE:PM) offers a rock-solid 5.1% yield.

The list goes on. Nearly every energy pipeline operator -- fantastic high-yield, toll-gate businesses -- is yielding above its cost of capital with distributions that, broadly speaking, look solid and sustainable. Incredibly, that's been true lately of even the industry's first-tier names, Kinder Morgan Energy Partners (NYSE:KMP) and Enterprise Products Partners (NYSE:EPD) among them.

And if, like me, you think oil and gas prices could pop in a big way in the not-so-distant future, you could conservatively play the space with ExxonMobil (NYSE:XOM) and its fortress-like balance sheet and 2% yield. Sure, Greenpeace may not send you a Christmas card, but your grandkids will thank you.

Obviously ...
Despite last week's market leap, I'm pretty excited about the current opportunities Mr. Market is presenting us with -- and so is our team at Motley Fool Income Investor. With a focus on the long term and buying the right stocks for any market -- dividend-paying stocks -- we're confident that we'll look back at this time and feel proud for having had the nerve to buy in the face of the worst market thrashing of this generation.

Our average recommendation currently yields 7%, and we've outperformed the market by more than three percentage points on average since the newsletter's inception. You can access all of our recommendations, along with our top five ideas for new money now, by joining Income Investor today.

And as a special kicker for those folks who join us now, new members will also get a free copy of the Fool's flagship annual special report, Stocks 2009. The report features eight ideas -- including several dividend payers -- from the Fool's top analysts. Among the picks:

  • A dominant audio specialist recommended by Rex Moore and Fool CEO Tom Gardner.
  • From David Gardner and Tim Beyers, a high-growth scrapper with the potential to revolutionize home entertainment.
  • From Philip Durell and Mike Olsen, a low-cost natural gas producer with strong growth and heady upside.
  • And from us dividend hounds at Income Investor, a fat-yielding oilfield equipment giant poised to pop when the economy turns.

Mr. Market may not be at his most polite right now, but he's still providing some unparalleled opportunities. If you'd like to see which stocks we're recommending to capitalize on that, just click right here.

Fool senior analyst Joe Magyer owns shares of Philip Morris International, but doesn't own shares of any others mentioned in this article -- yet. Coca-Cola is a Motley Fool Inside Value recommendation, while Enterprise Products Partners is an Income Investor recommendation. The Motley Fool's disclosure policy doesn't pay dividends, but it would if it could.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.