Dividend-oriented sectors, particularly utilities, were one of the market’s few bright spots in 2011. While the S&P 500 eked out an anemic 2.1 percent return last year, the Dow Jones US Select Dividend Index gained 12.4 percent. Given such a run, as well as the possibility that dividends’ favorable tax treatment could sunset at the end of this year, there is some anxiety among investors that dividend stocks could soon falter. Fortunately, Rochdale Dividend & Income’s (RIMHX) strategy focuses heavily on capital preservation in addition to current income.

Indeed, this large-cap value fund truly shines during periods of heightened market volatility. In 2008, for example, the fund lost 13 percentage points less than the S&P 500. And the fund’s largest rolling 12-month drawdown during the Great Recession was 33.3 percent, besting the market’s 43.3 percent loss by 10 percentage points.

Of course, investors don’t merely select mutual funds on the basis of their ability to lose less than the market during downturns. In fact, the fund’s most compelling feature is its relatively high 3.6 percent yield along with its quarterly distributions.

In addition to the fund’s current slate of large-cap consumer staples holdings, management selects higher-yielding securities such as real estate investment trusts (REIT), master limited partnerships (MLP), as well as some smaller-cap equities and preferred stocks. But finding securities that offer attractive yields is only the first step of their three-part investment process.

Once management identifies a security with a higher-than-average yield, it uses bottom-up, fundamental analysis to ensure the company can actually maintain its dividend. That means a company must have a solid balance sheet with low debt, produce strong cash flows, and demonstrate a commitment to offering a payout.

The final step in their methodology is to determine whether a company has growth potential, so that rising earnings not only offer the possibility of capital appreciation, but also a potential boost in a company’s payout.

In this uncertain economic environment, management favors recession-resistant companies with lean operations and strong cash flows. Although the fund currently has a sizable 27.5 percent weighting in consumer staples stocks and 13.7 percent in utilities, management will shift its weightings among sec- tors as opportunities emerge.

In 2007, for example, management abandoned the traditional dividend-paying financial sector not because it foresaw the scale of the Great Recession, but because its dividend discipline led it to conclude that financials would be unable to sustain their then enviable payouts. Although management does not believe the utilities sector will outperform again this year, its utility holdings continue to fulfill its stringent criteria.

Over the trailing five-year period, the fund is in the top 4 percent of Morningstar’s large-cap value category, and beat the market while incurring substantially less volatility. The fund tends to moderately lag the market during bull runs, while losing significantly less than the market during bearish periods.

Rochdale’s board of trustees recently approved the elimination of its sales load, which makes the fund’s high-dividend strategy even more appealing to value-conscious income investors.