I don't know about you, but I'm starting to get the urge to sell. My portfolio is getting smaller and redder by the day -- and there's no end in sight. Watching the losses stack up is becoming unbearable.

Which got me to thinking …

What would Buffett do?

As hard as I try, I can't convince myself that he would sell and cut his losses. Every indication says he would patiently wait things out and probably add to his positions as well. And he is.

His ability to invest without falling prey to the fear of uncertainty is what has made him the greatest investor of all time.

But that's Buffett, not me. And even though I know what I ought to do, I'm still plagued by anxiety -- and I'm nowhere near as patient as he is. What can investors like me do when panic sets in?

Get paid to wait!
Investors who, like me, are being made impatient and anxious by this bear market should consider investing in dividend-paying stocks -- which offer the closest thing the market has to a guaranteed gain.

As I pointed out at the beginning of the year, as stock prices drop, dividend yields rise -- which means that some of the world's top companies now have mouth-watering yields. And those yields can provide a nice return on your investment, even when the market itself is redlining.

But it's important not to focus on the yield alone, and the stocks below point to why:


Dividend Yield

Problem with Dividend

General Motors (NYSE:GM)


Dividend recently suspended for the time being.

Freddie Mac (NYSE:FRE)


Rising suspicion that dividend will be either suspended or cut to retain necessary capital to fund new mortgages.

Fannie Mae (NYSE:FNM)


Rising suspicion that dividend will be either suspended or cut to retain necessary capital to fund new mortgages.

Dividend yields from Yahoo! Finance as of July 22, 2008.

Even in a bear market, ridiculously high dividend yields are often too good to be true -- so do your research.

Due dividend diligence
It's important to buy dividend-paying companies that have strong fundamentals and the ability to increase their dividends over time. Although dividend stocks will get you through this bear market, they should also have the qualities necessary to become a core holding of your portfolio.

James Early and Andy Cross, co-advisors of Motley Fool Income Investor, like to find dividend-paying companies that have:

  • A dividend fully funded though free cash flow
  • Improving operations
  • A manageable debt load (less than 60% of capital)

The following companies fit those criteria, and all of them are large caps with yields of 5% or greater and dividend payments that have increased over the past year:


Market Cap

Dividend Yield

TTM Dividend Yield Growth

Bank of America (NYSE:BAC)

$127 billion



Pfizer (NYSE:PFE)

$122 billion




$189 billion



Wells Fargo (NYSE:WFC)

$91 billion



Data from Capital IQ as of July 22, 2008; TTM = trailing 12 months.

If you'd like to see what dividend-paying companies we're recommending now, you can take a 30-day free trial to Income Investor. James and Andy provide two new high-yielding stocks every month, and -- thanks to current market conditions -- they have quite a list of companies to choose from. You can click here to get started -- there's no obligation to subscribe.

Adam J. Wiederman owns no shares of the companies mentioned above. Bank of America is an Income Investor recommendation. Pfizer is both an Income Investor and an Inside Value recommendation. The Fool has a strict disclosure policy.