This from Mike:

If the global financial crisis has taught investors one thing, it’s that now is not the time to gamble with your money or your prosperity.

More companies have been bought, bailed out or bankrupted since this financial crisis began than most of us have seen in our lifetimes. And even as Wall Street’s dominoes keep falling, no one can be sure if the worst is over.

From here on – recession or not – targeting dividend stocks is one of the few strategies that will deliver income safely and efficiently.

In theory, dividends should prop up an investor’s portfolio during uncertain periods, or in market downturns. That’s because even if a company’s stock price falls, executives do all they can to maintain the firm’s dividend payout. That’s part of the reason that, over time, dividends have accounted for a major portion of investors’ total returns.

“Dividends are a nice anchor in a turbulent market,” said Judith Saryan, manager of Eaton Vance Dividend Builder Fund (EVTMX), FoxBusiness last year.

Or anytime. In fact, over the last 100 years, 40% of a stock’s total return is from dividends. That’s not surprising. According to a study by Ned Davis Research Inc.,  dividend-paying Standard & Poor’s 500 stocks rose by an average of 9.4% a year between 1972 and June of last year, well ahead of non-dividend-paying stocks, which rose by only 1.8% annually during the same period.

“Dividends are a sign of quality,” said Todd Ahlsten, manager of Parnassus Equity Income (PRBLX), said in an interview last year. “They force management to look at cash flow and how it invests in its business.”

But not all dividends are created equal. As losses mount, Standard & Poor’s 500 heavyweights have been putting their dividends on the chopping block, cutting or outright eliminating them for an indefinite time period.

And these aren’t fringe companies and chump change we’re talking about…

General Motors Corp. (GM), Ford Motor Corp. (F), Sprint Nextel Corp. (S), MBIA Inc. (MBI) – their dividends are gone.

And Citigroup Inc. (C), Bank of America Corp. (BAC), Fifth Third Bancorp (FITB) reduced their dividends to a mere penny. Fannie Mae (FNM) lowered its to 5 cents in August and hasn’t paid one since.

Nor does the list end there.

Just yesterday (Thursday), in fact, motorcycle icon Harley Davidson Inc. (HOG) slashed its dividend 70%, the first such reduction since 1993. The move was aimed at conserving cash, but sent Harley’s shares down 8%. in a move that was aimed at conserving cash. And the Dow Chemical Co. (DOW)– facing credit-market uncertainty, lower product demand and legal problems related to a failed joint venture – yesterday cut its dividend 64%, the first such move in the company’s 112-year history.

But there are still hundreds of companies holding their ground in the global financial crisis.

These firms understand that continued growth and success depends on a large body of investors. And to keep them on board the companies must maintain – and hopefully increase – their dividend payouts.

DRIPS Aren’t Dropping

With the stock market’s wrenching decline, many company’s shares are trading at bargain levels. A company that’s been able to maintain its dividend usually represents a better value to its shareholders.

In the reverse situation, where stock values soar, dividend yields fall, meaning income investors have to settle for lower returns.

So, with stocks down and yields high, income investors should consider starting or stepping up dividend reinvestment plans (DRIPS).

In DRIPS, the dividends investors would normally receive as cash are reinvested back into the stock under their name. To start, investors often don’t even need as much as the price of a full company share.

For example, if you invest $20 in a stock that trades for $100 per share, the DRIP will buy you one-fifth of a share of that stock. The dividend is reinvested accordingly, as well.

Over time, money is reinvested back into the stock, giving you more shares. And with more shares, the more dividend income you’ll receive.

Among other advantages, although there is usually a nominal transaction cost involved, the DRIPS’ automatic reinvestments allow investors to skip full-blown brokerage fees, which aren’t conducive to such small purchases.

Among the cons, most DRIPs require investors to be registered shareholders, which entails a little more paperwork than being a regular, or beneficial, shareholder. To enroll in a DRIP plan, investors must buy shares through a transfer agent. The process can take up to eight weeks before your account is opened and fully registered.

Some DRIP companies also have maximum amounts you can invest and hold in their stock. And they vary by time periods – monthly, quarterly, annually and lifetime.

For the public companies that offer the dividend plans, DRIPs provide a stable base of long-term shareholders. And often, these value-minded investors tend to buy more when share prices are down, as opposed to short-term traders, who are apt to bail out on a price decline.

For example, 71% of chemical company RPM Inc.’s (RPM) shareholders are enrolled in its DRIP. And more than 64% of Aflac Inc.’s (AFL) shareholders are enrolled in its DRIP, according to DRIP Central.

More than 1,600 public companies and American Depository Receipts (ADRs) have DRIPs, offering a wide choice of industry and market preference to potential investors.

But with so many to choose from, targeting the best ones can be a challenge without a broker helping you.

The Best DRIPs are…

The best DRIPs are from companies that have a high-yield and a track record of increasing their dividends.

In addition to RPM and Aflac, here are a few DRIP companies to keep your eye on. Not only have they hung onto their dividends in the worst financial crisis since the Great Depression, some have increased their payouts.

• Coca-Cola Co. (KO): There’s a reason “Coke” is the second most recognizable word in the world. The world’s biggest beverage-maker recently beat fourth-quarter earnings expectations, largely due to its ability to cut costs and promote demand with a rotating file of products. The company kicks out a 38-cent dividend every quarter. At its current share price of around $44.30, that’s a 3.45% yield. If that’s not enough, know that Warren Buffet owns 8.6% of the company.

• Intel Corp. (INTL): Intel is the market leader among chipmakers, dominating its competition by continually being the first to the market with the best product. It pays a 14-cent dividend every quarter, which at its current stock price represents a 4.07% yield.

• The Hershey Co. (HSY): The Pennsylvania-based candy and food maker has been a recession stalwart. It began paying dividends in 1930 – meaning it’s been making the quarterly payouts longer than most companies have even been around – and has been increasing them for 32 consecutive years, according to The Money Paper. Right now, its 30-cent quarterly dividend represents a yield of 3.32%. With its stock hovering a few dollars above its 52-week low, many of its DRIP investors are probably loaded up on Hershey shares like Halloween candy.

• Microsoft Corp. (MSFT): Microsoft is the largest software producer in the world, and has a firm grip on that title. The slowing demand for computers and computer software has taken a toll on Microsoft, but the projection of the industry and Microsoft’s dominance makes it one of the most stable tech stocks out there. Its current dividend yield is 2.72% on its shares, which kick out a 13-cent dividend every quarter.

• Exxon Mobil Corp. (XOM): Like the above companies, Exxon doesn’t need much of an introduction. The oil giant is one of the world’s largest companies, having paid investors dividends since 1882. Its 2.13% yield isn’t the highest in this small group of companies, but Exxon’s share price is one of the most stable.

If that’s not enough, here’s an extensive list of DRIP companies, and their minimum and maximum investment requirement.

It also details how much dividend income a company pays, how often, how long its paid dividends and whether it increased its dividend over time.

Editor’s Note: This is the latest installment of a new series that will explore ways for investors to recover from the U.S. financial crisis.

Source: For Dividend-Seekers, Financial Crisis Means it’s Time to Dip Into DRIPs

Wall Street bond traders estimate that the U.S. government will have to borrow a record $1.4 trillion during the current fiscal year – an unprecedented amount of debt that’s nevertheless needed to cover a federal budget deficit that’s expected to approach $1 trillion for the fiscal year, CNNMoney.com reported.

(The government’s fiscal year differs from the calendar year, and actually began Oct. 1. The $700 billion bailout plan was approved by the U.S. House of Representatives on Oct. 3, and was signed into law the same day by President George W. Bush.)

Experts predict that the government’s budget deficit will reach $988 billion for the current fiscal year – more than double the $482 billion estimate that the Bush Administration made in July. However, that estimate was made before the U.S. credit crisis worsened to the point that government leaders felt they had to take action. The controversial bailout plan was form that initiative has taken.

A deficit of $988 billion would be more than twice the record deficit of $454.8 billion, which was achieved during the budget year that ended Sept. 30.

Bolstering Banks

The main element of the bailout package – labeled a “rescue package” by the Bush Administration – was devised to bolster the balance sheets of banks, enabling them to resume lending. To that end, the Treasury Department is investing $250 billion into U.S. banks, a recapitalization strategy that U.S. Treasury Secretary Henry M. “Hank” Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke have billed as being the best way to jump-start lending.

So far, the federal government already has used about $125 billion to buy stock in the largest U.S. financial institutions, including Citigroup Inc. (C) JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), The Bank of New York Mellon Corp. (BK) and State Street Corp. (STT).

The remainder of the $250 billion that was allocated for financial institutions – between $124 billion and $131 billion – will be dispersed among smaller banks and thrifts, according to the rescue plan.

However, as a Money Morning investigative story revealed on Friday, much of that money is being used to finance takeovers of weaker banks, enabling big banks to get bigger, using taxpayer money to do so. [Editor’s Note: For a full report on this taxpayer-financed takeover binge – including which banks may be next on suitors’ shopping lists – check out this Money Morning investigative report, which includes commentary by Takeover Trader Editor Louis Basenese. This report is free of charge.]

Housing and Auto Woes

Of the remaining $450 billion, the government is looking to allocate between $40 billion and $50 billion to a tentative Bush Administration plan aimed at keeping as many as 3 million homeowners who are behind on their mortgages from losing their houses. Under that plan, which has been delayed by a series of legal snags and internal political debates, the money would be used to cover future losses on loans that are deemed eligible for federal support.

As currently conceived, the federal government would incur half the loss on a home loan if the mortgage company that controls the loan agrees to lower the borrower’s monthly payment for at least five years. On any given loan, the mortgage company would reduce the payment borne by the homeowner by writing off part of the loan balance, reducing the loan’s interest rate or changing other loan terms, sources told The New York Times.

While the Treasury Department is game to help U.S. homeowners, it’s been reluctant to extend direct support to U.S. automakers, which have also been hit hard by the financial crisis.

For instance, the government rejected General Motors Corp.’s (GM) request for $10 billion in assistance for its potential merger with Chrysler LLC after the Bush Administration decided it didn’t want to broaden its $700 billion financial rescue program to include industrial companies. President Bush also didn’t want to play a role in a GM-Chrysler merger that could cost the U.S. economy tens of thousands of jobs, The Times reported in a separate story earlier this week.

Instead of direct financing assistance, it looks like the Bush Administration will speed up the development of a $25 billion Department of Energy loan program that’s aimed at helping U.S. automakers develop more-fuel-efficient vehicles. The administration is also believed to have asked the U.S. Commerce Department to explore other ways that aid could be brought to the automakers – without expanding the scope of the bailout package.

The so-called “Big Three” automakers – GM, Chrysler, and Ford Motor Co. (F) – are in need of government assistance after being pushed to the brink of bankruptcy: Foreign competition and a slumping economy have combined to push vehicle sales down to their lowest level in 15 years.

GM has been in talks with Cerberus Capital Management LP about buying Chrysler since September. But potential investors in the deal have been hesitant to back the merger without the safety net of federal assistance, or a government guarantee of some sort. GM’s inability to secure financing at a time when credit is hard to come by and auto sales are in decline has left the No. 1 U.S. automaker with few options other than appealing to the government.

GM spokesman Greg Martin said in late October that the company had asked the Treasury Department to broaden recently enacted legislation – aimed at bolstering banks and financial institutions – to include auto companies.

In fact, General Motors Chairman G. Richard “Rick” Wagoner Jr. reportedly went right to Treasury Secretary Paulson Jr. and lobbied for the government to provide emergency financial aid to the Big Three via the $700 billion bailout plan.

Source: Bailout Plan Forcing U.S. to Borrow $1.4 Trillion, Creating a $1 Trillion Deficit