Yes, bear markets are a concern for all stock investors. But this is why a track record of dividends is important: The income survived and increased even when stock prices fell.

3. Locking In Low Income For Life

When interest rates are low, you don’t want to make the mistake of locking yourself into a low income for a long period of time. That’s the danger with financial products marketed as guaranteed against market risk: They can lock investors in to sub-par returns for many years.

For example: Compare a fixed income investment such as a CD, bond or annuity paying a rate of 3.15% to a portfolio consisting of the Dividend Aristocrats. The Dividend Aristocrat portfolio has a current TTM yield of 3.23%. That’s an even higher current yield than the annuity. And while dividend increases are not guaranteed, every stock in the Dividend Aristocrat portfolio has done so for 25 years straight—in good years and bad.

4. Chasing Yield

Dividends are nice. But don’t focus solely on the current dividend. That’s a common and dangerous trap.

What’s most important is the long-term stability of the dividend, and a company’s track record of increasing the dividend consistently, over time.

Over time, dividend growth, rooted in solid fundamentals and high-quality earnings, is far, far more important than current yield.

To assess a dividend-paying stock, consider the following factors:

• Is the company generating sufficient income to comfortably cover the dividend?