Economist Jeremy Siegel says that dividend-paying stocks are still the best investment choice — even though for most of 2009, non-dividend-paying stocks in the S&P 500 Index left dividend-payers in the dust.

“The entire decline in dividends can be attributed to the financial sector, which cut its total payouts by $79 billion over the past two years,” Siegel says.

“In other sectors of the economy — energy, health care, technology, consumer discretionary, consumer staples, telecom — dividends have actually risen over the past two years, even with the recession," he writes in Kiplinger’s.

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Through the years, Siegel notes, diversified portfolios of stocks that pay dividends have not only beaten those that don’t, but they have also handily outperformed the S&P 500.

In early December, the S&P 500 yielded 2.0 percent, Siegel points out, and while this is about one percentage point less than the interest rate on ten-year Treasury bonds, dividend payers have some decided advantages over Treasuries.

“Except in the midst of recessions, dividends tend to increase over time while coupons on government bonds remain constant,” Siegel says.

Dividends keep up with inflation better and pay a higher rate than do Treasury Inflation Protected Securities, he says.

Baskin Financial Services president Dave Baskin says dividend-paying stocks, including real estate investment trusts, or REITs, still “have some catch up to do,” as they have yet to advance at the same pace as other asset classes during the recent rally, The Financial Post reports.