Are Dividend-Paying Stocks the Best Strategy During a Bear Market?

Posted: Feb 10, 2014 10:45 AM

An investment in knowledge pays the best interest. -- Ben Franklin

The above quote is taken from my “Maxims of Wall Street.” The third edition was just released (see details below).

What’s the best way to survive and prosper when stocks slump? We are now in a full-scale market retreat that began on January 1, 2014. It is not surprising after the massive boom of 2013, when stocks climbed 30% or more.

Steve Forbes said it best, “Everyone is a disciplined, long-term investor… until the market goes down.” Then people panic.

What’s the best strategy -- (1) sell your stocks and go to cash? (2) sell stocks short and actually profit as the market retreats? Or (3) dollar-cost-average in stocks that inevitably will go up?

For most investors, the smart answer is (3) to dollar-cost-average, especially in stocks that pay steady and rising dividends.

I have a whole section of great quotes from seasoned investors and money managers about dividend-paying stocks in “Maxims.” Here are just a few words of wisdom:

“Dividends are the critical factor giving the edge to most winning stocks in the long run.”
-- Jeremy Siegel, The Wizard of Wall Street, author of “Stocks for the Long Run”

The evidence supports this conclusion. According to Ned Davis Research, companies paying a dividend returned 10.1% compared with just 4.1% for non-dividend companies between 1972 and 2006. What's more, during periods when the market declined (like now) between 1970 and 2000, dividend stocks outperformed non-dividend-paying stocks by a 1.5% margin every month!

Lowell Miller, author of “The Single Best Investment” and money manager extraordinaire, insists on investing only in rising-dividend stocks. He states,
“Dividend growth is the true signal of a prospering company.”

Miller’s formula for beating the market is simple but powerful. He calls it “Investing with Peace of Mind.” His formula is:

High Quality + High Yield + Growth of Yield = High Total Return

Doug Casey says it best, “Dividends are an outward sign of inward grace.” I can tell Doug went to a Catholic school.

I like this statement by John D. Rockefeller: “Do you know the only thing that gives me pleasure? It’s seeing my dividends coming in!”

Since the early 1990s, I have emphasized dividend-paying stocks in my newsletter Forecasts & Strategies. To find out my latest picks (one rose 70% last year), go to

New Third Edition of “Maxims” Hot off the Press

I just got a call from David Norcom, a successful hedge fund manager in Dallas, Texas. He had ordered 100 copies of my new edition of “Maxims of Wall Street” to give to clients and investors. He told me that he’s gotten dozens of thank you responses from recipients of the book, including several prospective clients. “Friends tell me they love the quotations; the book makes an excellent reference guide that they can pick up at any time and learn from some pithy proverb or advice.” (By the way, Norcom will be joining us at our Global Summit in the Bahamas.)

Good news! The second edition has sold out -- more than 20,000 are in print now --- and I’ve gone back to press with an updated new 3rd edition. It includes more than a dozen new sayings by Ron Baron, Peter Lynch, John Neff, Ken Fisher and Burt Malkiel. Every page is packed with the wisdom of ages, such as J. Paul Getty’s advice, “Bank on the trends and don’t worry about the tremors.” That’s what we are trying to do at Forecasts & Strategies.

“Maxims” makes a perfect gift for students, friends, your favorite broker and business colleagues. I’m offering a half-price deal. Buy the first copy for $20 and all additional copies are only $10. Plus, I pay the U.S. postage. Also: If you order an entire box of 32 books, you pay only $300 postpaid. (For orders sent outside of the United States, add $10 per book for shipping and handling.)

Heddy Green said it best, "When I see something cheap, I buy a lot of it."

To order, call Eagle Publishing at 1-800/211-7661. Mention priority code MAXIMS to buy individual books and MARKR to buy a box of 32 books.
Note: I autograph all copies if you order through Eagle Publishing.

In case you missed it, I encourage you to read my e-letter column about how President Obama should have earned an MBA rather than a law degree that appeared last week in Eagle Daily Investor. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.