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9 Best Dividend Stocks for Bear Markets


It's no secret that dividend-paying stocks often come out ahead during a market sell-off. In 2008, when Standard & Poor’s 500-stock index nosedived 37%, the S&P 500 Dividend Aristocrats, an index of large companies that have raised their dividends every year for the past 25 years, surrendered a more tolerable 22%.

But dividends don’t always protect you against the worst of a market drop. Consider Bank of America (BAC), which had been a steady dividend payer up until the financial crisis. Then, in 2008, the stock gave up a whopping 63%. How dividend-paying stocks perform “depends on the type of bear market you have,” says Chris Philips, a senior investment analyst at Vanguard.

That being said, some dividend stocks have a better record than others. Here, we’ve identified nine such firms based on their performance during three hostile periods: the bursting-of-the-tech-bubble bear market, from 2000 to 2002, when the S&P 500 plunged 47.4%; the financial-crisis-related 2007-09 disaster, during which the index plummeted 55.3%; and the 2011 correction, a five-month period during which the S&P stumbled 18.6%, just shy of the 20% drop that typically defines a bear market.

These companies have products or services that consumers will pay for, even in a tough economy. Seven out of the nine stocks boast yields higher than the S&P 500’s 1.9% payout. And eight of the nine companies derive the bulk of their sales in the U.S., leaving them relatively insulated from the negative effects of a powerful dollar (when the greenback strengthens, overseas profits translate into fewer dollars).

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