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Stocks to Get You Through the Bear Market

By Adam Wiederman - Updated Nov 11, 2016 at 4:55PM

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You do want to survive, don’t you?

I don't know about you, but lately I've been spending my time fighting the urge to sell. My portfolio has become 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 ...

WWBD?
What would Buffett do?

As hard as I might 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, or open new ones. And he is, as his recent op-ed in The New York Times made clear.

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!
Those who are made impatient and anxious by this bear market (like I am) should consider investing in dividend-paying stocks -- which offer the closest thing today's 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 also boast mouthwatering yields. And those yields can provide a nice return on your investment, even when the market itself is red-lining.

But it's important not to focus on a dividend yield alone, as recent happenings in the stocks below make clear:

Company

Problem With Dividend

Freeport-McMoRan Copper & Gold (NYSE:FCX)

Dividend suspended as metal prices have declined and the company cuts output to conserve cash.

The New York Times (NYSE:NYT)

Dividend cut by 74% as advertising spending slows.

Post Properties

Dividend reduced by more than half to preserve capital in a difficult environment to find funding.

Even in a bear market, growing companies that pay dividends can be too good to be true -- so be sure to 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 certainly help 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:

Company

Market Cap

Dividend Yield

Trailing-12-Month
Dividend Yield Growth

AstraZeneca (NYSE:AZN)

$53 billion

5.2%

40.7%

Nokia (NYSE:NOK)

$51 billion

5.0%

23.3%

Allstate (NYSE:ALL)

$13 billion

7.6%

8.1%

Alcoa (NYSE:AA)

$8 billion

7.3%

3.0%

Data from Capital IQ, a division of Standard & Poor's, as of Dec. 2, 2008.

If you'd like to see what dividend-paying companies we're recommending now, you can take a 30-day free trial of 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.

This article was first published July 22, 2008. It has been updated.

Fool analyst Adam J. Wiederman owns shares of none of the companies mentioned above. Nokia is a Motley Fool Inside Value recommendation. The Fool has a strict disclosure policy.

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Stocks Mentioned

Nokia Corporation Stock Quote
Nokia Corporation
NOK
$5.21 (0.00%) $0.00
Alcoa Inc. Stock Quote
Alcoa Inc.
AA
AstraZeneca PLC Stock Quote
AstraZeneca PLC
AZN
$64.65 (-1.80%) $-1.19
The Allstate Corporation Stock Quote
The Allstate Corporation
ALL
$126.94 (2.54%) $3.15
The New York Times Company Stock Quote
The New York Times Company
NYT
$35.05 (10.60%) $3.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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