Most of us are familiar with Einstein's famous quip that compound interest is one of the most powerful forces in the universe. In these days of low interest rates and extreme stock market volatility, this truism may be playing a role in the current infatuation with bonds and other long-term interest-bearing instruments. But Einstein had it wrong. What is true about interest can be even more true for stock dividends.

You may think that I am comparing apples to oranges because interest payments on bonds are generally fixed while stock dividends are discretionary and can rise or fall with the fortunes of a company. All true, but during the financial crisis even bond interest payments weren't safe.

Let's face it. The laws regarding creditor rights have become a bit wishy-washy and vulnerable to politics. Look at General Motors, where the government and GM employees wound up with a bigger stake than its senior creditors. We also find ourselves in an economic environment where inflation is viewed by those in government as a positive. After all, it's a tax on wealth. Welcome to the world of the "new normal."&hTab;

The threat of inflation highlights the advantages of dividends over fixed-rate interest. During inflationary times companies experience inflation-related earnings growth as currencies fall. This should cause their stocks to rise and allows them to increase nominal dividends. Fixed-rate bonds, by contrast, decline in value.

Readers of my column know that the closest I usually come to equity investing is convertible bonds and preferred stocks. I still like those, but given the abundance of good dividend stocks out there, I am broadening my horizons.

In fact many blue-chip equities yield more than long-term Treasurys. But before you start scooping up dividend stocks, I recommend that you run the following safety checks:

Is the company's dividend payout below 75% of earnings? Does the company have a long history of steady or increasing dividends?

Did the stock suffer only a general market decline during the financial crisis, or did it fall further? Lastly I would check to see whether stock analysts are recommending the stock.

I ran these tests recently and several blue-chip names came up.

Pitney Bowes ( PBI - news - people ) (PBI, 23), for example, has a dividend yield of 6.2%. The company is well known for making postage meters and managing mailrooms. It has managed a 10% compound annual growth rate in its dividends since 1982, and its payout ratio falls well below 70%. For most of the last two decades Pitney Bowes' dividend yield has ranged from 2% to 3%.

I also like AT&T ( T - news - people ) (T, 28) , which pays a quarterly dividend of 42 cents and has a 5.8% yield. The old Ma Bell has thousands of shareholders who care very much about dividend payments, so I think this one is pretty safe.

My last dividend stock pick is Houston's Centerpoint Energy (CNP, 16). Its stock has a 4.7% yield. The company is an electric utility provider for 5 million customers in six states: Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas. Since 2005 it has increased its dividend every year.

I like these yield stocks, but don't expect them to lead the next stock market rally. They won't lead the next bear market plunge either. That is why I think they are appropriate for those of us more comfortable owning bonds.

Actually, recommending equities is not really new for me. My recent columns have featured master limited partnerships, and I have been a vocal bull on Canadian oil and gas trusts since 2004. In some ways Canadian income trusts are very similar to dividend stocks.

For those who have followed my advice on Canadian trusts, here is a news update: By now most of the trusts have converted to corporations because of tax law changes in Canada. The changes also eliminated Canadian withholding tax on dividends paid to U.S. taxpayers when the shares are held in IRAs or similar tax-sheltered accounts.

This means that IRAs are now the best places for these yield machines. Of course the tax treatment of dividends in 2011 is still a big question. Will the Bush tax cuts, including the preferential 15% tax on dividends, be extended?

I think they will be, but even if they aren't, with inflation coming, the three stocks mentioned above are great additions to your income portfolio.