A friend of mine employs this exact strategy successfully. He doesn't buy the highest yielding stock, many of those are volatile, but rather blue chip stocks with dividend yields of at least 3%. Yes, the stock price depreciates after the dividend pays out, but it's a small amount and recovers quickly enough for him to sell out in less than a week with even a small capital gain. He normally invests around $50,000-$70,000 on one stock so it's not for the faint of heart.
In 2014 he's been able to collect about $16,000 in dividends and capital gains. On a $65,000 investment, assuming it's continually invested (which in his case it isn't), that's about a 24% gain. There are taxes on dividends and capital gains of course but if you do this through a ROTH you avoid those completely.
There are risks with this. While this could work in a rising market it wouldn't in a falling market. (Though in a falling market short selling is about the only short term strategy that would work.) You need to invest enough to capture sufficient dividends to offset the transaction costs which isolates, rather than spreads, your risk. Also a company, or the market in general, could have drastic news that craters your stock and you might be stuck in a position for years.
My friend has only recently started this strategy so there are no long term results to report. I'm not recommending this nor would I do it. My track record of dismal results confirms my suspicions that I possess the rare gift of being able to turn any stock into ether just by purchasing it. If one could buy gravity, and I did, we'd all fly off the planet.
Take care,
JMC