In April I had the opportunity to attend an investment conference. During one of the sessions, the moderator asked the audience, which was packed with fund managers and CEOs, when they thought the current recession would end. We were given four choices:

1. The fourth quarter of 2009
2. The first quarter of 2010
3. The second quarter of 2010
4. Sometime in 2011

Equipped with gadgets at our tables we all voted. The vast majority thought the recession would continue well into 2010 or 2011. Only 5% thought it would end in the fourth quarter of this year.

Just six months later, we read that the recession probably ended in the third quarter of 2009, which wasn’t even one of the choices in the survey. The change in perception about the economy in the past six months must be one of the largest ever seen in such a short time and has been a driving force behind the market rally.

Of course, many problems still persist. To paraphrase Edward Harrison, “the recession is over, but the depression is still here.” There are still significant deflationary pressures on the economy, and recovery in many sectors may be far off. Most investors’ accounts are still far below their peaks. The steps taken to avert a collapse of the financial system may slow a recovery and limit options in the years ahead. Investors are likely to be more risk averse, at least for a while.

The return on an investment portfolio is a combination of income and capital appreciation (or depreciation). Historically, income has been the more important factor for investors. Studies have shown that income, in fact, has provided the bulk of returns to equity investors over time.

The problem, of course, is that earning income requires selecting the right companies and then holding on to them as the dividends start to accumulate. It can be hard to do this when faced with so many seemingly more exciting strategies or the chance to follow up on a tip from Maria, Jim, or Erin on CNBC. Successful dividend investing doesn’t require their advice. It doesn’t even require cable.

Successful dividend investing requires good stock selection, especially during times like these. January of 2009 was the worst month for dividend cuts since Standard and Poor’s started keeping track in the 1950’s. Many dividend payers have lagged the market this year. Still, others have been superior performers.

For many investors, the ability to generate income from their portfolios will be a key component in their future plans and lifestyle choices. Part of the “new normal,” which Mohamed El-Erian of PIMCO has written about, may be an unwillingness to count on capital gains to support their lifestyles (this was never a good idea anyway). This is especially true for investors reaching retirement age at a time when their account balances are much lower than they were several years ago. The challenge for investors will be to find a way to generate meaningful income from their investment portfolios without taking excessive risk.

William R. Andersen, CFA is the Principal of Andersen Capital Management and Portfolio Manager of the Wanger Income and Growth Fund