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 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 that's just what he's doing, as his op-ed in The New York Times made clear last year, and which his annual report just confirmed.

His ability to invest without falling prey to the fear of uncertainty 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. They 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 flatlining.

But it's important not to focus on a dividend yield alone, as recent developments with the following stocks make clear:


Problem With Dividend

Capital One Financial (NYSE:COF)

Announced a 86.7% dividend cut to improve the ratio of tangible equity to tangible managed assets.

Wells Fargo (NYSE:WFC)

Slashed dividend by 85%, which will amount to $5 billion in savings.

Cedar Fair (NYSE:FUN)

Cut its quarterly dividend roughly in half to reduce debt and strengthen its balance sheet.

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 core holdings of your portfolio.

James Early, advisor of Motley Fool Income Investor, likes 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

BHP Billiton (NYSE:BHP)

$97 billion



Sanofi-Aventis (NYSE:SNY)

$68 billion



StatoilHydro (NYSE:STO)

$55 billion



Kraft Foods (NYSE:KFT)

$32 billion



Data from Capital IQ, a division of Standard & Poor's, as of March 10, 2009.

If you'd like to see what dividend-paying companies we're recommending now, take a 30-day free trial of Income Investor. James provides two new high-yielding stocks every month, and -- thanks to current market conditions -- he has 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. StatoilHydro and Kraft Foods are Motley Fool Income Investor recommendations. The Fool has a strict disclosure policy.