Although valuing a stock based on it's dividend may have fallen out of style for a while, let's take a look at some of the benefits of investing in stocks with high dividend yields versus investing in high growth stocks. To get started, let's begin with an analogy. Then we can take a look at how Altria Group (MO) stacks up as a dividend-paying stock.

Flipping vs. Buying and Holding

During the housing boom of the last few years, a new term made its way into the collective vocabulary of people everywhere: flipping. Flipping a house involves buying a house, possibly doing a little fix-up work and then selling it a short time later for a profit.

Most real estate investors who flip homes rely on appreciation in the general real estate market more than anything else. If the real estate market is going up, the value of most homes will also go up—even without doing anything to the property to increase its value. Flipping homes works well when home prices are increasing. Unfortunately, it doesn't work so well when home prices are decreasing. When home prices are decreasing, a real-estate investor who buys a home hoping to flip it may wind up three months from now with a home that is worth less than he paid for it.

Now let's take a look at a different kind of real-estate investor: the buy-and-hold investor.

Buy-and-hold real estate investors buy homes and then rent them out to tennants. Buy-and-hold investors know that the value of the home is going to fluctuate and that it will most likely increase in value over time, but they are not going to rely solely on the home value appreciating to make money. They make money month in and month out by renting the homes. Every month, when the rent checks come in, the net worth of buy-and-hold investors goes up. They also get great tax deductions from buying and holding the home. In the end, the buy-and-hold investor can also sell the property for a gain.

During good markets when real-estate values are appreciating, both flippers and buy-and-hold investors make money. During bad markets when real-estate values are declining, only the buy-and-hold investors seem to do well. It's not much different in the stock market.

Growth vs. Dividends

Growth stocks are the sexy stocks in the stock market. You never see the stodgy utility companies that pay great dividends on the covers of magazines or as the topic of conversation on the trendy blogs. Nope, instead you see high-flying stocks like Google (GOOG), Apple (AAPL) and Research in Motion (RIMM). After all, stocks that can appreciate a few hundred percent in a year are the stocks we all want to be in on, right?

Growth stocks are great investments when the market is growing. Everyone is bullish on the market, and growth stocks keep rising higher and higher. Unfortunately, growth stocks are typically the first to suffer during bear markets. Because of their inflated prices, growth stocks have farther to fall when the rug gets pulled out from under them.

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To learn more, click here to watch the video on Dividends in a Bear Market.