Judy Alster over at rightside advisors wrote a good article on how dividends can take some of the sting out of this bear market. Some interesting points:

Some of your investments should be giving you reasonably reliable returns that don’t require you to be constantly monitoring your holdings — investments that will, in fact, pay you just for showing up. Dividends are how a company signals steady operating cash flow and legitimately returns earnings to its owners.

and

When you buy a dividend-paying stock, you get periodic payments and your portfolio gets some insulation against a falling market. Over the last 12 months the S&P 500 index has declined over 37%; in the same period the Mergent Dividend Achievers Index (DAA) has declined 31.5%, the PowerShares Dividend Achievers ETF (PFM) is down 30% and some high-yield dividend indexes are down even more. The 21st Century Investor Dividend Portfolio is down 21%.

Survive-a-Bear’s take on this is that you can use the dividends to purchase discounted growth equities now while the price is low, without having to put additional cash into the volatile market.

Tags: bear market, dividends, Investing

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