Sometimes there is a free lunch. You can have your cake and eat it, too. But you have to know what you’re doing and where to shop…

Several weeks ago, my good friend, David Newman, called me to introduce an incredible investment strategy. Admittedly, it seemed “too good to be true” because the leverage on company dividends was just out of this world – even in a bad market. But the results were clearly quite impressive. In fact, the numbers looked so good that David embarked on launching a new investment service called Accelerated Income.

Worst Year since 1974

The Accelerated Income strategy is great tool to diversify an investment portfolio. That’s especially true today amid one of the worst market environments since 2002 when just about everything is deep in the loss column. This includes even conservative investments like corporate bonds, convertible bonds and other fixed-income investments. Real estate investment trusts or REITs, already hammered in 2007, are also still losing ground this year. Almost everything predicated to income investing is down in 2008.

What about Treasury bills? Not much of a panacea, either. Treasury bills barely yield 2%. After inflation and taxes you’re actually sitting on a loss bordering almost 6%.

Stocks, of course, have been drilled hard. Even international markets, including the once high-flying BRICs (Brazil, Russia, India and China) have tanked. European bourses are down 23%, Asian stocks are off by more than 13% and the Dow is down 14%.

Even time-tested dividend-paying strategies like the Dow Jones Select Dividend Index have plunged more than 22% over the past year – including dividends.

After seven months of trading, U.S. and foreign stocks are logging their worst year-to-date returns since Nixon was President in 1974. These are rough times…

Beware the Dividend Trap!

The “Dividend Trap” is also a common investment mistake in a bear market.

When stocks are in a virtual nosedive, it’s commonplace for value investors to scoop in and buy a blue-chip stock that’s crashed. As the stock gets sliced and diced, the annual payout rises making that company even more attractive.

Not always.

In a bear market, investors should be careful of the Dividend Trap. That’s because bear markets are usually accompanied by a profits’ recession; companies typically reduce or cut dividends in an economic recession making that tempting yield a dangerous proposition.

For example, over the last six months a blizzard of American companies, mostly financial services stocks, have sliced or cancelled dividends altogether under the subprime contagion. Other companies outside of the financial sector have also chopped dividends because earnings have contracted for four straight quarters.

Just because a blue-chip stock pays a big dividend doesn’t necessarily mean you’ll get that payout in 12 months. If the market environment deteriorates from your point of purchase, watch out!

Income on Steroids

Although dividends have historically contributed to about 35% of a stocks’ total return since 1926, that total return feature has shriveled since the 1990s.

Dividends as a percent of total return have plummeted to barely 10% over the last decade; in short, dividends are much harder to secure these days. The S&P 500 Index, despite trading 20% below its October 2007 high only yields 2.8% in dividends. That’s hardly enough to save your bacon in a bear market. And global stocks, measured by the FTSE 500 World Index, yields just 2.7%.

But the Accelerated Income strategy can boost your dividends exponentially – big time!

A NYSE-listed financial services stock that pays a paltry 1.84% in annual dividends can yield more than 12% in annual income.

Another company, a major oil producer, paying 2.1% in annual dividends can pay 10.5% in income annually.

How about a major oil driller yielding just 0.85% paying a 14% guaranteed cash dividend?

I know what you’re thinking. Not too many things are guaranteed in this world. But this service opens the door to a very special product that assures you’ll obtain these and other double-digit returns – even if the stock market continues to tank. In my book, that’s win, place and show.

What’s truly amazing about the Accelerated Income strategy is that even if a stock declines 10%, 20% or even 50% in value, you’re assured of that big fat dividend! The stock can literally tank; but you’re still getting that double-digit yield as the contract must be honored.

I can’t think of a better investment strategy in one of the toughest years for the markets. At the very least, every investor should allocate a portion of their portfolio to this strategy.

Death and taxes are guaranteed in this life. But now, so are dividends on steroids!