I don't know about you, but many times in the past few months I've spent a lot of time fighting the urge to sell. As my portfolio became smaller and redder by the day, it seemed as if there was no end in sight. Watching the losses stack up became unbearable.

Which got me thinking ...

What would Buffett do?

As hard as I tried, I couldn'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 top positions, or open new ones. And that's just what he's doing, as his annual report recently 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 like me who are made impatient and anxious by this bear market 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 last 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

JPMorgan Chase (NYSE:JPM)

Thought to be one of the best-poised banks to survive the credit crisis, but it recently cut its dividend from $0.38 to $0.05.

PNC Financial Services (NYSE:PNC)

Recently cut its dividend by 85% in March to free up capital.

Caterpillar (NYSE:CAT)

A Merrill Lynch analyst expects the company to cut its dividend later in the year, because of short-term difficulties.

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


$123 billion



Vodafone (NYSE:VOD)

$96 billion



Sun Life Financial (NYSE:SLF)

$11 billion



Aflac (NYSE:AFL)

$9 billion



Data from Capital IQ, a division of Standard & Poor's, as of April 8, 2009.

If you'd like to see what dividend-paying companies we're recommending now, take a 30-day free trial of Income Investor. With the current market conditions, the team 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. Aflac is a Stock Advisor recommendation. The Fool has a strict disclosure policy.