Here is Fool's message. The well protected yield of over 3.8% is a great reason alone to buy the stock. Treasuries yield under 1% for up to a year and barely above for longer.
Instead, focus on the free cash flow payout ratio. It's much more difficult to fake the cash flow, which means that investors can have more confidence in it as a measure of dividend health.
Ideally, you want to find companies with free cash flow payout ratios less than 80%, which demonstrates that the company has an adequate cash cushion to maintain its dividend payments -- and even raise them.
In fact, of the 119 S&P 500 members with trailing dividend yields of more than 3% now, 66 of them (55%) have free cash flow payouts below 80%. Here are just a few of them:
Company Dividend Yield Aug. 24, 2007 Dividend Yield Aug. 26, 2009 FCF Payout Ratio
Verizon (NYSE: VZ) 3.8% 5.9% 46%
SYSCO (NYSE: SYY) 2.3% 3.8% 49%
Abbott Laboratories (NYSE: ABT) 2.5% 3.5% 41%
Source: Capital IQ, a division of Standard & Poor's, as of Aug. 26, 2009.
Because of the market turmoil, you can find higher yields today than you could just two years ago; while their stock prices have declined, the companies' ability to pay dividends appears unchanged.
The combination of lower prices, higher yields, and a sustainable dividend is one you definitely want to research further.