3 Dividend Stocks to Ride the Rally

If you are doubting the recent rebound in stocks, you�re not alone. It�s hard to imagine everything is smooth sailing from here on out — even if the unemployment rate does start with an 8 and even if headlines seem to be optimistic about the euro zone. There still are serious macroeconomic problems that will take time to resolve, and the recovery (if this can be called one) is very fragile indeed.

But if you�re tired of sitting on the sidelines and missing out on the profits, a good compromise is to find shelter in safe-haven dividend stocks that could rally as the market continues to show strength — and provide a good hedge against any future slide with their strong balance sheets and regular dividend payments.

So what dividend stocks should you be buying during the rally? Here are three to consider right now:

Abbott Laboratories

Abbott Laboratories (NYSE:ABT) is a pharmaceutical giant with a 3.5% yield and dividends paid since 1926. That yield is not as high as other stocks in Big Pharma, but Abbott has a track record of much better share performance. ABT stock is up 16% in the past five years, compared to a flat market. Top competitor Pfizer (NYSE:PFE) is off 26% in that same time frame, and Merck & Co. (NYSE:MRK) is down roughly 20% in five years. Abbott stock is up over 13% year-to-date in 2011.

Fundamentally, Abbot is looking mighty good. The company has posted 10 straight quarters of year-over-year revenue increases and is tracking over 50% growth in earnings per share for fiscal 2011 over fiscal 2010.

Lest you fear the perpetual threat of patent expirations in Big Pharma, know that Abbott has a bit more lead time than rivals. For instance, its powerhouse�arthritis medication Humira doesn�t go off patent until 2016. In the meantime, the company currently is working on spinning off its brand-name medications from its generic operations, diagnostic devices and nutritional operations. The move could insulate Abbott — and investors seem to like the look of things, based on strength in recent months.

Coca-Cola

Warren Buffett and his flagship investment company, Berkshire Hathaway (NYSE:BRK.B), are closely watched as the �smart money� on Wall Street. Folks hang on every share bought or sold — however, for quite some time, Coca-Cola (NYSE:KO) has been far and away the Buffett and Berkshire leader. The Oracle of Omaha owns about 200 million shares of KO�s roughly 2.3 billion shares outstanding, for almost 9% of the total stock in Coke. This consumer staple is a king of branding and marketing — Coca-Cola invented the six-pack, believe it or not — and throws of a nice 2.8% dividend from its cash-rich operations.

Fundamentally, Coca-Cola is going strong with eight straight quarters of year-over-year revenue growth and 10 straight quarters meeting or exceeding EPS from the year before. The fact that profits continue to grow impressively despite Coke�s big footprint tells you a lot about this company�s operations. Earnings per share have soared from $2.49 in fiscal 2008 to $5.06 in fiscal 2010, more than doubling!

Throw in more than 100 years of dividends dating back to 1893 and a strong record of annual increases in those dividend payouts, and you have a pretty compelling buy.

Kimberly Clark

Kimberly Clark (NYSE:KMB) makes Kleenex tissues, Huggies diapers and other paper products for both consumer and professional uses. While consumers haven�t quite been opening their wallets like they used to (don�t believe the rosy holiday sales numbers), it�s hard to believe these basic necessities from KMB will ever see truly �weak� sales.

This stability and baseline demand has allowed for eight consecutive quarters of year-over-year revenue increases. True, economic conditions in the U.S. and Europe still can weigh on KMB going forward in some regard — especially when coupled with fuel and wood pulp price inflation.

However, these hurdles are not insurmountable, and investors appear to be loving the dividend potential and recent strength of Kimberly-Clark�s numbers. KMB stock is up more than 12% so far in 2011 — triple the market — on top of its 4% dividend.

And let�s not forget that KMB’s dividend has been increased annually for 25 years and has been on the books since 1935. That should make income investors rest easy that the payouts are safe and sustainable.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.