Many investors prefer dividends over capital gains for a steady stream of income. So they look for stocks with high dividend yields. Not only do these stocks offer steady income but also provide a cushion against equity market risks.

The U.S. stock market has been caught in a bull-bear tug of war this year. On the one hand, the domestic economy treaded a moderate growth path as reflected in increased consumer confidence, higher spending power, renewed optimism in housing recovery and an improving job market. Additionally, a wave of mergers and acquisitions brightened up the stock market.

On the other hand, rate-hike uncertainty, an aging bull market, lofty stock valuations, strong dollar, lower oil prices and global growth concerns including the Greece crisis and China slowdown have awakened the bear.

This instability has compelled many investors to play defensive and depend on the dividend-paying stocks for steady returns. After all, dividend paying stocks are proven outperformers over the long term and are relatively safer for creating wealth.

While the risk tolerance of an individual investor determines his appetite for growth versus dividend stocks, it’s generally prudent to balance the portfolio to keep a mix of both. Also, while some companies may offer a special dividend to distribute a windfall, it is always advisable to choose a consistent performer with strong fundamentals.

Best of the Year

In addition to robust yields, most of the dividend paying stocks have generated handsome returns this year as well. Each of the stocks below offer dividend yields of 5% or more. With the help of the Zacks Stock Screener and by combining high dividends, rising earnings estimates, and other valuation criteria, we have handpicked five promising stocks. Not only do these stocks have a high dividend yield but they also have a Zacks Rank #1 (Strong Buy) or #2 (Buy), indicating the likelihood of upside in shares over the next month or so.

Preferred Apartment Communities, Inc. (APTS - Snapshot Report)

Dividend Yield 5%

Preferred Apartment Communities, Inc. is a real estate investment trust. The company acquires and operates multifamily properties primarily in the United States. It also acquires senior mortgage loans, subordinate loans or mezzanine debt secured by interests in multifamily properties, membership or partnership interests in multifamily properties and other multifamily assets. Preferred Apartment Communities, Inc. is based in Atlanta.

The company has been paying dividends every quarter since 2011 and raised it from 12.5 cents to 18 cents in Jun 2015.

With a market capitalization of $298.7 million, the company offers a promising dividend yield of about 5%. Moreover, the stock, which also carries a Zacks Rank #1, has a strong earnings history and is likely to continue to benefit from a solid business model. The company has posted positive earnings surprises in two out of the last four quarters at an average of 0.77% and its expected earnings growth rate over the next five years is 7%. The stock has gained nearly 45.4% year-to-date.

Northern Tier Energy LP (NTI - Snapshot Report)

Dividend Yield 16%

Northern Tier Energy LP is an independent downstream energy company with refining, retail and pipeline operations that serves the PADD II region of the United States. It operates its assets in two business segments: the refining business and the retail business. It also owns and operates SuperMom's Bakery, which prepares and distributes baked goods and other prepared food items. Northern Tier Energy LP is based in Ridgefield, CT.

This Zacks Rank #1 stock offers a robust dividend yield of 16%. The company has consistently increased its dividend over the past several years and performed decently on the earnings front as well. Northern Tier Energy LP has surpassed the Zacks Consensus Estimate in three out of the last four quarters at an average of 28.5% and its expected earnings growth rate over the next five years is 8.2%. With market capitalization of $2.39 billion, the stock has gained about 16.2% year-to-date.

Arbor Realty Trust Inc. (ABR - Snapshot Report)

Dividend Yield 8%

Arbor Realty Trust is a specialized real estate finance company investing in real estate-related bridge and mezzanine loans, preferred equity, mortgage-related securities and other real estate-related assets.

The company has maintained its annual dividend per share of 60 cents over the past three quarters with a dividend yield of 8%. With a market capitalization of $361.8 million, the company offers an encouraging dividend yield of about 8%. This Zacks Rank #1 stock has performed decently on the earnings front as well. Arbor Realty Trust has surpassed our EPS consensus in three out of the last four quarters at an average rate of 48.7% and has also gained about 4.9% over the past year.

Ardmore Shipping Corporation (ASC - Snapshot Report)

Dividend Yield 10%

Ardmore Shipping Corporation engages in the ownership and operation of product and chemical tankers. It provides shipping services to customers through voyage charters, commercial pools, and time charters. The company provides seaborne transportation of petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies. Ardmore Shipping Corporation is based in Mahon, Ireland.

With market capitalization of nearly $324.3 million, the company has been paying dividends every quarter since 2013 and raised it from 6.6 cents to 31 cents in Nov 2015.

This Zacks Rank #1 stock offers a robust dividend yield of 10%. The company has consistently increased its dividend over the past several years and performed decently on the earnings front as well. Ardmore Shipping has surpassed our EPS consensus in all the last four quarters at an average rate of 25.4% and its expected earnings growth rate over the next five years is 10%.

Spectra Energy Partners, LP (SEP - Snapshot Report)

Dividend Yield 6%

Spectra Energy Partners, LP is a growth oriented, Delaware master limited partnership recently formed by Spectra Energy Corp, headquartered in Houston, TX, to own and operate natural gas transportation and storage assets. The company is one of the largest operators of natural gas pipelines and storage facilities in North America.

This Zacks Rank #2 stock offers a robust dividend yield of 6%. The company has consistently increased its dividend over the past several years and performed decently on the earnings front as well. Spectra Energy Partners, LP has surpassed our EPS consensus in all the last four quarters at an average rate of 34.7% and its expected earnings growth rate over the next five years is 5.4%.  The stock has market capitalization of nearly $13.43 billion.

Bottom Line

Investing in these stocks should ensure a steady stream of income that is likely to grow over time. Moreover, consistent earnings growth is likely to translate into capital appreciation.