While last year saw dividends decrease more than 20%, dividend-paying stocks are looking far better in 2009.  The S&P predicts dividends increasing 6% in the Benchmark 500 index, giving investors the possible chance to reap the benefits of higher dividend yield in 2010.  Where to go for dividends, of course, remains the fodder of message board debate. Alan Brochstein recently took a look at utilities stocks, basing his top-ten on higher-than-average yield, company debt, and the possibility of dividends increases.  Jim Cramer likes larger companies that have shown strength through consistent dividend increases despite smaller yields.  Other investors—such as David Peltier—made similar choices, predicting a dividends boost in February. Determining what dividends stocks are right for you is not simply a matter of taking your favorite investor or analyst’s picks and betting the farm.  Rather, a solid dividends strategy will take into account yield, long-term dividends increases, debt to equity ratio of the company, and the growth rate ratio of earnings per share.  You won’t win on all points all of the time, so determine your long-term position before making choices.

Where Cramer and Peltier are on the money is looking to dividend growth rate and steady dividend increases over time.  Coca Cola (KO), for example, has increased dividends consecutively over the past 47 years, and between 1998 and 2007 saw dividend growth of 11%.  This makes Coca Cola a consistent long-term choice for serious investors who want to reap the benefits of dividends, although Seeking Alpha points out that the company hasn’t grown at the same rate.  Jim Cramer likes General Mills (GIS), which looks like a great choice—the company raised dividends twice over the period of about half a year, which demonstrates the strength of the company coming out of the recession.  Procter and Gamble (PG) and Johnson & Johnson (JNJ) are similarly safe bets.  The name of the game here is consistency: these companies have proven themselves through the recession and are poised to grow this year.

These relatively safe positions should not negate the fact that higher-yield stocks also have long-term potential, especially among larger companies. Cramer chose AT&T, a company with 6.1% yield currently, as a dividends play.  Jake Lynch’s phenomenal picks should not be passed up.  CenturyTel grew its operating margin over its competitors (AT&T being one of them), and, with a yield of 7.7%, makes for a very attractive choice if the economy continues to recover from last year’s illness. He also likes Kimberly-Clark (KMB), whose robust profit surge and brand popularity make it a contender against other established household product brands.  The choices made by Brochstein that show positive dividend growth over the past five years will work for many investors if interest rates remain low.

When it comes to dividends, you might have to make a trade-off: will you go for higher dividend growth rate, or will you chance it with a company that displays higher yield (even over a shorter period of time)?  This is a judgment call on your part.  In my opinion, what makes high yield stocks so attractive is the ability to profit in the seemingly more predictable short term.  Tobacco companies and utilities, historically high-yield sectors, have long-term growth to back up higher dividend yield.  (Therefore, it’s no wonder Cramer likes Altria—he gets to have his cake and eat it too!)

However, don’t be suckered into high-yield stocks when a track record doesn’t exist.  The above picks are all wise in that they have more than simply high yield in their favor, including low debt and a healthy growth rate.  Plenty of high-yield, steady yield stocks exist, if you can separate the wheat from the chaff ahead of the curve.  Many an investor has found that there’s no such thing as a free lunch, and you may end up paying big before you get a dividend payout.