Come what may this earnings season, income stocks will shine, writes Genia Turanova of Leeb Income Performance.

The fundamentals of the US stock market will be on display for the next few weeks, as earnings season has begun and the companies we recommend will be reporting their quarterly results.

We are sure there are going to be a few surprises for our portfolio holdings-and hoping for mostly positive ones. We'll keep you abreast of any developments that are significant enough to influence our opinion on a recommendation.

For example, an especially strong report might prompt us to adjust our "Buy Up To" price upwards. Or if the market overreacts and a buying opportunity develops, we'll update you about that as well. But today, we only have good news.

Merck (MRK)
This High-Yield Income recommendation has just announced that the Data Monitoring Committee stopped its 16,500 patient Odanacatib trial early on a "favorable benefit-risk profile" in postmenopausal patients with osteoporosis. This indicates great results for the drug. The filing is expected in the first half of 2013.

The shares jumped on the news, and as several brokerages have already raised their price target, we are following suit on the improved growth prospects for the company. It's now estimated that Odanacatib (together with other drugs in the pipeline we discussed when we first recommended the company in our May issue) can potentially generate $3 billion in annual sales.

Better growth should equal higher fair value and expected target price for the shares. Buy Merck up to $47.

Phillips 66 (PSX)
This recent ConocoPhillips (COP) spin-off has just announced its first-ever dividend distribution. Not unexpectedly, as the company had made known the dividend commencement back in May, the 20 cents quarterly payout per share will amount to a 2.4% yield on the stock.

Further increases are possible, too, and are likely: at today's levels, the dividend only represents about 20% of Phillips 66's average 2009-2011 cash from operations. The company's been guiding for further increases as well, and it should be able to afford them, as it estimates that for 2013 the cost of dividends will be about $500 million. Both Phillips 66 and ConocoPhillips remain Income & Growth recommendations.

SPDR S&P Dividend ETF (SDY)
Looking at the broader picture, the positive trend remains in place for dividend investors. In the second quarter of 2012 alone, net dividend increases for the entire US market (dividends increased minus dividend cuts) totaled $12 billion. It's a new record and an increase of about 14% for overall cash payments. At the same time, payout rates remain near historic lows, at 31%, highlighting the general investment case for stocks.

Here's another important number: at current levels, the market as represented by the S&P 500 index is only down 6% from its April high. But you would never guess the decline is so small, by historical and all other measures, from all the anxiety the media is currently generating.

Dividend-paying issues, if you take SDY as a proxy, are only down 3.7% off their March highs. Note that this number doesn't even include dividends; if you factor in the dividend paid, the decline for SDY since its high of the year is only 2.2%. And year-to-date, SDY is up for a 3.3% total return.

We are giving you these numbers in such detail to show that even though sometimes staying the course can be difficult (and, to be sure, from time to time one should revisit and re-chart the path one has mapped out) the best policy for now is clearly to stay invested and stay the course.

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