The Dow has raced skyward in 2009 without substantial pullbacks, now hovering in the 10,500 range as we close out the year. And for its part, the S&P 500 is trading comfortably above the 1,100 mark. Despite the stock market's climb, however, investors are skeptical of its ability to sustain this rally further into next year. Many are worried about what will come of the economy when the federal stimulus wears off and the Federal Reserve begins its withdrawal of liquidity from the system.

With uncertainty at the forefront and the possibility of disappointing economic growth ahead, it's important to have dependable income streams from dividend-paying stocks to balance out your portfolio. What’s more, the surge thus far has been led by lower-quality names. As the market moves forward, investors should expect to see an increasing shift toward leadership from quality companies.

Dividends mean stable returns, but they can signal a company's financial health -- especially in this economy, in which even former steady payers such as General Electric have slashed their dividends. Mature companies that still have more cash than they need, even in this stormy market, are some of the strongest businesses out there.

Investing in stocks such as Penn Virginia Resource Partners (NYSE:PVR) and Reynolds American (NYSE:RAI), which yield 8.6% and 6.7%, respectively, can give you a steady return in a volatile market. And when the recession clears, these strong companies should generate even greater returns for investors as their shares rise.

How do you find solid companies with strong dividend yields? I've done some of the dirty work for you, with help from The Motley Fool's CAPS screener. To find stocks with hefty dividends, I screened for companies with:

  • A minimum dividend yield of 5%.
  • Market caps of $1 billion or greater.
  • Four- and five-star ratings (out of five) from our 145,000-member CAPS community.

Here's what popped up from my screen:

Company

Current Dividend Yield

Market Cap
(in billions)

CAPS Rating
(out of 5)

Amerigas Partners (NYSE:APU)

6.7%

$2.3

****

Duke Energy (NYSE:DUK)

5.5%

$22.6

****

France Telecom (NYSE:FTE)

8.0%

$66.6

*****

Health Care REIT (NYSE:HCN)

5.9%

$5.7

*****

Penn Virginia Resource Partners

8.6%

$1.1

****

Reynolds American

6.7%

$15.7

****

Royal Dutch Shell (NYSE:RDS-A)

5.5%

$189.2

****

Data from Motley Fool CAPS.

Dividends are one way to search for quality companies, but it's important to dig deeper and make sure that any individual investment is right for your portfolio. Dividends should -- and the key word here is should -- be accompanied by strong management teams, balance sheets, and cash flows, all of which reflect a strong, properly positioned business with a competitive advantage.

But that's not always the case. Large debt loads, especially coupled with declining operating results, can be red flags that warn of a looming dividend cut. If companies need cash to refinance or put back in their business, they won't keep giving it back to shareholders. Make sure to check for debt levels on the balance sheet, along with revenue and the amount of cash the company is generating from operations. The amount of debt could determine the difference between a dividend diva and a dividend dud.

Also, pay special attention to whether a company's dividend yield goes much above 8% for common stock. If the yield has leaped recently, chances are it's because the stock price has fallen sharply, not because the company raised its dividend.

REITs, which are required to pay out a large portion of their earnings, are an exception to that rule. However, still-tight credit markets mean that rolling heavy debt loads in this environment could be a death sentence for some REITs. Foolish buyers should approach with caution.

The above table is a great place to start your search, but you'll still need to stay up-to-date on the doings of dividend divas. In a market where cash is king, their payouts could still prove fickle. Keep an eye on your favorite stock candidates' fortunes with help from Motley Fool CAPS.

More dividend-paying Foolishness:

Fool contributor Jennifer Schonberger does not own shares of any of the companies mentioned in this article. Health Care REIT, France Telecom, and Duke Energy are Income Investor recommendations. The Motley Fool has a disclosure policy.