A solid dividend-paying stock can offer significant downside protection in the market. Even better, when dividends are reinvested, you can build enormous wealth over time. For example, $10,000 invested into the S&P 500 in the third fiscal quarter of 1990 would leave you with about $23,700 today on price appreciation alone. But with dividends factored in, you'd have about $40,600 -- four times your initial investment and almost twice as much as without dividends.

Reinvesting dividends is incredibly simple. All you need is a good dividend reinvestment plan, or DRIP, to get started.

A DRIP is a type of account that lets individual investors buy shares directly from a company rather than from a broker. Shares are bought in one of two ways:

1) Direct purchase. This is when the account holder puts money in the account to buy shares of the public company offering the plan. Most DRIP account holders opt to buy shares at regular intervals, and are allowed to make transactions for as little as $25.

2) Dividend reinvestment. DRIP account holders can opt to reinvest their dividends in additional shares.

Most DRIPs are a real service to investors. Once all the initial legwork is done (finding a good dividend-paying stock to hold for the long-term, registering with the DRIP, and choosing the intervals with which to purchase shares), a DRIP helps take care of an important psychological component of investing: it enforces discipline.

Look for dividend-paying stocks with solid fundamentals and a track record of staying healthy in any market environment. This will save you the agony of sleepless nights worrying about whether the market is up or down. In the long-run, you as a DRIP investor win because you have two inevitable forces on your side: compounding and time.

With these points in mind, I went on a hunt to find the best DRIP on the market using the following criteria:

-- Market capitalization of at least $250 million

-- Currently yielding at least +5%

-- Dividend payout ratio of less than 80%

Here's what I found:
 

Any of the utilities in the table above would make a good option for conservative investors, but generally speaking the sector leaves a little to be desired for capital appreciation. Tobacco names such as Altria (NYSE: MO) and Universal (NYSE: UVV) offer nice payouts, but as my colleague David Sterman recently noted, the tobacco industry is in decline and should be avoided.

For my money, the best DRIP on the market is AT&T (NYSE: T). The company's unrivaled high-speed Internet subscriber base, U-verse broadband television service, fixed-line telephone and wireless phone divisions make it a diversified cash cow and a dividend investor's dream.

AT&T's wireless division comprises almost half of sales and looks to be the company's next big cash cow, as its fixed-line business continues a slow decline. To combat the impact of data-hungry smartphone users on its network, AT&T has changed its wireless data pricing plans, eliminating its $30 a month unlimited plan and imposing penalties on customers who exceed their limits. AT&T customers have often complained of slow download speeds, and combined with increased spending and upgrades, this should ease the strain going forward.

It's true that the AT&T is heavily dependent on Apple's (Nasdaq: AAPL) iPhone and could one day lose its exclusivity agreement. But aside from network improvements and other offerings such as Dell's (Nasdaq: DELL) new Aero smartphone, the company is working to improve customer loyalty with better pricing. Until the day comes when it loses exclusivity, it is little cause for concern.

Action to Take --> If AT&T's new mobile pricing plans and network improvements take hold and the company can stay one step ahead of Verizon, the stock should make for a great long-term core holding for any investor.

AT&T's dividend payout ratio of 61.6% last quarter means that the company is paying out less than two-thirds of earnings -- plenty of room to be considered a safe payout ($3.9 billion in cash flow helps, too). In fact, AT&T has a stellar track record of boosting dividends: the payout has grown an average of +5.5% annually during the past five years.

At 12.5 times earnings, the stock is reasonably valued, but it hasn't offered an average yield higher than 5% in the past five years, making right now a great name to get in for the long-haul.