Here we go again. Market volatility is picking up, and it’s causing an upset stomach for many an investor.

There is an excellent remedy, though — tilt the equity portion of your portfolio toward large, high-quality companies that provide essential products and services and pay strong dividends. Shares of these companies typically display well-below-average price volatility because investors can count on them, so a painful sell-off is much less likely in rough markets.

#-ad_banner-#True, these stocks tend to be well beyond the fast growth phase, but you’d be surprised at how many manage to pace or outperform the overall market over time, which is a notoriously hard thing to do.

To find such a stock, you need only scan a list of the 30 companies that make up the Dow Jones Industrial Average. The one I’d like to tell you about currently pays a dividend of $1.76 a share, which translates to a very attractive yield of just under 6% based on recent share prices.

And talk about a stock that helps you sleep better at night… The price tends be much more stable than average, typically fluctuating only about half as much as the overall stock market. You can tell this from the beta coefficient, a simple statistic that compares a stock’s price movement to that of the market. If the beta is 1.0, it means the stock moves with the market. The Dow stock I’m referring to — AT&T Inc. (NYSE: T) — has a beta of 0.46, so it’s usually 54% less volatile than the market.

For those of you worried about AT&T’s ability to compete and pay high dividends after last December’s decision to abandon a $39-billion deal to acquire 4G wireless provider T-Mobile USA Inc., don’t let the setback deter you from owning this safe, high-quality stock. Yes, owning T-Mobile would have contributed greatly to AT&T’s profit-making ability if the government hadn’t foiled the deal with an antitrust lawsuit. But the fact is AT&T will be just fine without T-Mobile.

For one thing, it’s still the second-largest U.S. wireless carrier, with 101 million customers — 89 million traditional wireless users and 12 million users of e-readers and other non-cellphone devices. And it’s still the No. 1 local phone company in 22 states, serving 40 million phone lines and 16 million Internet users.

As a mature telecommunications firm, AT&T doesn’t grow revenue very quickly anymore, so I’m satisfied with the 3% growth rate of the past decade, and I expect about the same growth rate going forward. Still, at this point in the firm’s long history, revenue is astounding in plain dollar terms. It topped $126 billion in 2011 and is on pace to reach $129 billion in 2012. Assuming growth continues at 3%, revenue will hit $146 billion in 2016.

With plentiful free cash flow of $14.5 billion, AT&T comfortably handled the $3 billion payment it had to make in the fourth quarter of 2011 to T-Mobile’s owner, Deutsche Telekom (OTC: DTEGY), for dropping the T-Mobile merger. Analysts project free cash flow will climb by 4% annually for the next three to five years, rising to $17.7 billion in 2016.

That’s a reasonable estimate, in my opinion, because AT&T can really rake it in — even without T-Mobile. Remember, it still has a huge and growing base of wireless customers and a substantial base of traditional phone customers. Together, these customers account for about 70% of revenue, with wireless now contributing around 50% and landlines about 20%. The rest comes from things like wireless data access and directory advertising.

Clearly, the move toward wireless has hurt the landline division, but that business is still a cash cow. And AT&T should continue to benefit from fast growth in demand for iPhones and other wireless handsets. The latest sign of this: In the first quarter of 2012, the company activated 4.3 million iPhones, a 19% increase compared with the first quarter of 2011, when it activated 3.6 million. Handsets should become even more profitable — analysts predict AT&T and other wireless providers will cut back on subsidies, the practice of offering the actual phone for free or at a deep discount in hopes of more than making up the cost through user charges.

AT&T is also looking to spur growth through bandwidth acquisitions, like the $1.9 billion worth of 700 MHz frequency it purchased from Qualcomm on Dec. 22, 2011. Large amounts may soon also be purchased cheaply from Verizon Communications Inc. (NYSE: VZ), which is seeking to sell its 700 MHz frequencies in order to pursue other acquisitions. The added 700 MHz capacity will help AT&T expand its burgeoning Long-Term Evolution (LTE) network. LTE is widely considered the obvious successor to current wireless technology.

Risks to Consider: Competition is intense, and it could become even more so if small wireless carriers decide to compete aggressively on price. A price war would almost certainly hurt cash flow, and this could slow or stagnate dividend growth.

Action to Take –> Since there’s no impending price war, I’m confident AT&T will remain the safe, reliable dividend-payer investors have come to expect. Estimates for the dividend to climb by 3% a year going forward are easily achievable, in my opinion, considering AT&T’s strong cash position today and the high likelihood of maintaining that position in the future.

With a current price-to-earnings (P/E) ratio of 49, the stock may appear very expensive compared with the industry average P/E ratio of 24. However, the forward P/E ratio of about 13, based on estimated per-share earnings of $2.40 in 2012, is very reasonable. So if you’re thinking about investing in AT&T, now is a good time to buy.

Consider, too, that investors have historically been willing to pay 21 times earnings for the stock. If you multiply that by 2012’s estimated earnings, you get a share price of about $50 (21 X $2.40 = $50.40). This implies 56% upside from the current stock price of about $32 a share. I doubt it’ll rise that much in 2012, but I wouldn’t be surprised to see it keep up with the market — just like so many large, high-quality stocks manage to do over time.