It's a rough time for most investors. Since it peaked on Oct. 9, the S&P 500 is down around 14%. And that's a pretty good snapshot of most of the market, too. Although some companies have done better, many others have fared significantly worse.

For investors oriented to the long term, however, the fun is just getting started. When stocks are down in the dumps, their dividend yields get all that much higher. Assuming those dividends are well-covered, those higher yields let you buy that much larger an income stream with every dollar you invest.

Of course, that extra cash from your initial purchase is great. What really drives home the benefits, though, is what happens over time. As your nest egg grows, you can take those dividends, add them to your regular investment capital, and plow them back into buying even more shares. The better the dividends, the faster your money compounds.

It's root, root, root for the bears?
In fact, when you think about it, a prolonged bear market just might be the best opportunity to maximize your long-term net worth -- because it accelerates all that compounding. Dividends are set in terms of cents per share, not cents per dollar of market cap. The lower the share price, the more shares (and future dividends) you buy every time you reinvest your existing dividends or add new cash on your own.

Not only that -- truly successful companies tend to raise their dividends over time. So as you reinvest dividends and add shares, dividend hikes have an even greater impact on your bottom line.

This turmoil in the market provides an outstanding opportunity to buy strong companies with good dividends. And that will build the foundation that enables compounding to provide you with substantial returns.

That reality often gets lost in the televised daily panic over plummeting stock prices. Take a look at this table, though, to see just how well dividends can hold up -- or potentially even rise -- as a company's stock falls:


Q4 2007

Q1 2008

Price Change
Oct. 9, 2007
March 18

General Growth Properties (NYSE: GGP)








General Electric (NYSE: GE)




Harley-Davidson (NYSE: HOG)




Lowe's (NYSE: LOW)




Wells Fargo (NYSE: WFC)




W.W. Grainger (NYSE: GWW)




Can you build your future fortune?
It can be painful to live through a down market. Instead of dwelling on it, though, at Motley Fool Income Investor, we're focusing on the cash your investments can throw off and your ability to redeploy that cash in even better opportunities during the very same down market.

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At the time of publication, Fool contributor Chuck Saletta owned shares of SYSCO, General Electric, and Lowe's, and his wife owned shares of General Growth Properties and Harley-Davidson. SYSCO is an Income Investor recommendation. The Fool has a disclosure policy.