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 ...

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:


Problem With Dividend

State Street (NYSE:STT)

Company announced a 96% dividend cut to free up capital. 

Macy’s (NYSE:M)

Company slashed quarterly dividend to $0.05 per share from $0.13 per share as consumer spending halts.

Duke Realty (NYSE:DRE)

REIT cut dividend in a cost-cutting attempt as earnings fell 63%.

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:


Market Cap

Dividend Yield

Dividend Yield Growth

Royal Dutch Shell (NYSE:RDS-B)

$163 billion



Allianz (NYSE:AZ)

$42 billion



Duke Energy (NYSE:DUK)

$20 billion



Chungwa Telecom (NYSE:CHT)

$17 billion



Data from Capital IQ, a division of Standard & Poor's, as of Feb. 9, 2009.

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 doesn’t own shares of any company mentioned above. Duke Energy is an Income Investor recommendation. The Fool has a strict disclosure policy.