Patience can pay in dividends

— -- When it comes to dividends, some are wondering if things have become too good to be true.

Such yields are especially alluring to investors tired of getting low 3% returns even from high-yield savings accounts. And if the market has bottomed, and individual stocks have stabilized, the big dividends could be a great payment for patient investors, says John Snyder, portfolio manager for Sovereign Asset Management. "If investors have a time horizon of beyond three months, some of these stocks will work out," he says. "You're getting paid while waiting."

But there's a danger the fat dividends are only setting investors up for torment when the companies cut or eliminate them, says Don Taylor of Franklin Rising Dividends fund. Often, a dividend yield is high because Wall Street suspects the payout will be cut. Tuesday, two of the formerly highest-yielding stocks in the S&P 500, Regions Financial and Wachovia, slashed their dividends 74% and 87%, respectively. And a stock can always decline in value more than its dividend payout, wiping out any benefit.

Investors can reduce risks by:

•Sticking with those best able to maintain their dividends. Bank of America is considered one of the relatively strong banks, says Tom Cameron, portfolio manager at Dividend Growth Advisors, which owns the stock. The company has raised dividends every year for 30 years and will soon reveal its plans for 2008. "Bank of America is the pretty pig in the beauty contest," he says.