Dividend-paying stocks, generally speaking, have been dragged through the mire over the past six weeks, sliding steeply after a strong rally due to rising speculation that the US Federal Reserve will curtail its program of “quantitative easing” and thus unleash interest rates for what’s sure to be, at least in many investors’ minds, a straight-up climb from here.

The crux of the concern is that dividend-paying stocks’ relative attractiveness compared to risk-free assets such as US Treasury bills, notes and bonds will disappear as the latter’s rate of return goes higher and closer to historic norms.

Traditional bond buyers who were driven into equities due to the fact that risk-free vehicles were yielding less than or, at best, only slightly more than the rate of inflation will likely herd back into treasuries now that market rates may no longer be compressed by the actions of an interventionist Fed. That’s the headline explanation for declines in major indexes that track dividend-paying stocks.

The Dow Jones Utility Average has shed 10.1 percent on a price-only basis since April 30, 2013, and the S&P/Toronto Stock Exchange Income Trust Index, which is now essentially an index of 14 Canadian real estate investment trusts plus Inter Pipeline Fund (TSX: IPL-U, OTC: IPPLF), has lost 10.6 percent.

The Alerian MLP Index was late to the unwinding. The master limited partnership tracker is off just 2.7 percent since April 30 but since May 22 it’s down 5.2 percent.

The S&P 500 Index is up 2.3 percent from April 30, 2013, through midday June 11, 2013. The world’s most widely watched equity index is down 1.3 percent from May 22.

It’s never easy to watch share prices of ostensibly solid companies decline day after day. At the same time, however, at least for new money this selloff presents an opportunity to establish positions in essential-service companies, master limited partnerships and select, high-dividend-paying Canadian stocks, as many of our favorites had traded above our recommended buy-under targets.

For those of you frustrated by this recent market action, take comfort in the historical fact that, over time, dividend-paying stocks have outperformed non-dividend-paying stocks, and that companies that grow their dividends have done even better than those that simply maintain payouts.

According to research compiled in a May 2013 white paper by Goldman Sachs Asset Management, since 1926 dividends accounted for more than 40 percent of the return of the S&P 500 Index. From 2000 to 2009 the S&P 500’s total return of negative 9 percent would have been a heftier negative 24 percent had it not been for the 15 percent contribution from dividends.

Looking out over an even longer period–one that includes several interest-rate spikes–provides more evidence in support of the case for dividend investing for the long run.

Numbers crunched by Ned Davis Research Inc show that $100 invested in a market-capitalization-weighted collection of “dividend growers and initiators” would have grown to $4,169 by December 2012. The same amount invested in the broader group that includes all dividend-paying stocks would have grown to $3,104.

And $100 invested in January 1972 in the S&P 500 Total Return Index on a market-cap weighted basis would have yielded just $1,622 by December 2012.

Dividend-paying stocks have outperformed non-dividend paying stocks on a total return basis. And they’ve done so with less volatility. Companies that have been able to raise or to begin paying dividends had even higher total returns and lower volatility than the broader dividend-paying group.

Dividend growers and initiators generated a long-term annual total return of 9.55 percent from January 1972 through Dec. 31, 2012, with long-term volatility of 16.23 percent and a long-term Sharpe Ratio of 0.32.

(Ned Davis Research defines “volatility” as a statistical measure of the dispersion of returns for a given security or market index. The higher a security’s volatility, the riskier it is. “Sharpe Ratio” is a measure of the return achieved for risk taken. The greater a portfolio’s Sharpe Ratio, the better its risk-adjusted performance has been.)

All dividend-paying stocks have generated a long-term annual total return of 8.76 percent with volatility of 17.03 percent and a Sharpe Ratio of 0.26. The S&P 500 Total Return Index’ annual total return for the comparable period is 7.05 percent, its volatility is 17.99 percent and its long-term Sharpe Ratio is 0.14.

Ned Davis Research has also demonstrated that dividend-paying stocks, particularly dividend growers, have helped investors outpace inflation. Since 1972 dividend growers have significantly outperformed non-payers in moderate, elevated and most notably in high inflation environments.

Rising interest rates often follow inflation. And, crucially in this context of fevered worry, dividend growers have historically enjoyed a strong track record as interest rates rise. With less volatility than non-payers, dividend-paying stocks have outperformed over each of the last seven interest-rate-tightening cycles.

We have often characterized dividends and dividend growth as key factors that mark high-quality companies among the broader group of global equities. You get a regular slice of cash flow, and you get the closest thing to assurance that earnings growth will continue into the future.

Generally speaking, a company that’s paying a dividend is generating a good amount of free cash flow. Free cash flow–the cash a business generates after making investments to maintain or expand its asset base–is in many ways the lifeblood of a company. It allows a company to pursue opportunities that enhance shareholder value. Without cash, it’s tough to develop new products, make acquisitions, pay dividends and reduce debt.

A company capable of sustaining for the long term and growing at regular intervals its dividend is supported by an underlying business that’s capable of generating solid and expanding cash flows.

And it also probably has a disciplined management team that shows great care in how it makes use of this cash flow, in its capital investment decisions, in its cost controls, in its debt management. Clearly these types of companies are those that shareholders want to own, thus higher demand and higher prices for their shares.

Standard & Poor’s decision to lift its outlook on US credit is the latest factor driving traditional benchmark yields higher Monday, following relatively upbeat employment reports from the US Dept of Labor for April and May.

Many pixels have been expended and much ink spilled discussing Ben Bernanke’s intentions with regard to the Fed’s program of long-dated bond-buying. The US central bank is currently buying $85 billion a month of agency mortgage-backed securities. And the Federal Open Market Committee has it would likely maintain the federal funds rate near zero “at least through 2015.”

But the yield on the 10-year US Treasury note has spiked all the way to 2.21 percent as of this writing, all due to the fact that in early May Mr. Bernanke merely hinted at a conclusion to the open-ended program, without offering specific. The Fed chairman has said, however, that easy monetary policy would continue until the US unemployment rate declined to 6.5 percent.

Despite an attention-grabbing and expectations-beating new jobs number of 175,000 for May, the unemployment rate actually ticked higher, to 7.6 percent from 7.5 percent.

And the personal consumption expenditure deflator, the Fed’s preferred gauge of inflation, rose 0.7 percent in April from a year earlier, the smallest increase since 2009. Absent a faster pace of inflation, it’s hard to see Treasury rates moving back to historical norms.

And even should the economy pick up more speed, employment return to more normal levels and inflation tick up due to, for example, a broad-based wage-growth push, high levels of corporate cash on balance sheets and low current payout ratios provide scope for dividend growth.

And dividend growth is a key factor in stock-market outperformance over the long term, including during periods of inflation and rising interest rates.