Exclusive FREE Report: Jim Cramer’s Best Stocks for 2015.

The single largest misconception out there for individual investors is that it’s not possible to generate consistent gains in changing market conditions by owning stocks. See, smaller investors don’t have the time to follow the markets every day, and have a tendency to enter bull markets once they’ve peaked and sell out of bear markets right before they bottom out.

And once investors have been burned in a stock, they’re going to be reluctant to jump back in with their hard-earned money. Even so, no investors ever made money by placing cash in their mattress.

That is why, after three straight years of negative returns from the S&P 500 index, we launched the Dividend Stock Advisor (formerly called the SaveSafe Plan) model portfolio in January 2003. The basket of stocks and municipal bond funds went on to generate a total return of 13.50% in 2003, when the major market averages rebounded significantly. But more importantly, the basket went on to gain another 13.64% in 2004, while the gains for the S&P 500, Dow Jones Industrial Average and Nasdaq Composite failed to crack the double digits. (The yield on a five-year CD, which could also be a useful benchmark for the aims of the model portfolio, is around 4%.)

As was the case two years ago, currently there aren’t many worthwhile money-making opportunities for investors looking to generate steady income. Interest rates are so low that many cash money-market accounts are offering 1.5% returns, and the dollar has been weak to boot. Even corporate bonds appear played out, as the Federal Reserve will likely take interest rates higher than the current 2.50% before the rates move back lower. And the inverse nature of bond yields tells us that higher rates mean losses in principal.

But most folks are looking to gain a higher return on their investments than they would find in a CD or government note. So, where does that leave chastened investors? Well, even before President Bush officially signed his dividend tax cut in May 2003, smart investors had begun looking at conservative equity vehicles that offer a solid, consistent yield.

It may be the new 15% tax rate, or a record level of cash sitting on balance sheets, but companies have shown an increased penchant to pay dividends. In 2004, there were 272 dividend boosts among S&P 500 members, compared with 247 in 2003. And the hits may keep coming in 2005, as a recent report by strategists at Lehman Brothers suggests that total cash payments should grow 30% in 2005, compared with just 8% improvement in earnings.