For 26 years, I’ve been out there hunting the big yields and bringing them home to my readers.

— Roger Conrad, Big Yield Hunting

Last week, both the Dow Jones Industrial Average and the S&P 500 index dropped for the fifth consecutive week, which is relatively rare. In fact, for the S&P it was the first time since July 2008 and the first time for the Dow since July 2004.  Furthermore, the drop last week was the worst of the five and the worst overall for the stock market since August 2010.

Is this the beginning of a waterfall decline  and recession like in 2008, or more like the “up and down market” of 2004? I’m leaning more towards a pause that refreshes like in 2004.  Sure, some stocks with poor earnings have gapped down, but there are just as many stocks rising — e.g., Global Crossing (Nasdaq: GLBC), Dominos Pizza (NYSE: DPZ), Red Robin Gourmet Burgers (NasdaqGS: RRGB), and Dean Foods (NYSE: DF). In fact, despite suffering the worst week since last August, the New York Stock Exchange managed to produce 295 stocks hitting 52-week highs and only 77 stocks hitting 52-week lows. This was a better “new high/new low” ratio than the week before (233 highs and 86 lows).

History Says Up From Here

Let’s look at historical precedent: how has the stock market performed subsequent to having fallen for five consecutive weeks? The answer is above average! Since 1980, there have been 24 instances where the S&P 500 has fallen for five consecutive weeks. Over the next five weeks the S&P has gone up 62.5% of the time and averaged a median gain of 2.32%, much higher than the average gain for any five-week period of only 0.68%. The odds favor a rebound, not a further decline.

But Income Investors Shouldn’t Care!

But here’s the thing: even if the market were to fall further, owners of high-yielding stocks with strong underlying businesses should welcome it! As I wrote in The Best Stocks are Dividend Stocks, market declines are an income investor’s best friend. During the Great Depression of the 1930s the Dow Jones Industrial Average reached its peak price on September 3, 1929 and didn’t hit that level again until November 24, 1954 – more than 25 years later. Zero price appreciation for 25 years.

Stocks were the worst place to be during this period, right? No way. An investor who bought the stocks in the index at the peak in September 1929 and reinvested dividends actually made more than four times his money — a positive return of more than 6% per year during this 25-year period!  This is more than twice what an investor who sold stocks in 1929 and bought bonds made and four times what an owner of treasury bills made.

Not only did stock investors make good money during one of the worst periods in stock market history, but the bear market of the Great Depression actually accelerated an investor’s returns. Wharton finance professor Jeremy Siegel explained this phenomenon in his investment classic, The Future For Investors:

Although dividends declined a whopping 55 percent from their peak in 1929 to their trough in 1933, stock prices fell even more. As a result, the dividend yield on stocks, which is critical to an investor’s total return, actually rose. $1,000 invested at the market peak would have turned into only $2,720 in November 1954 if the Great Depression had never occurred. This is 60 percent less than what investors actually accumulated as a result of this economic catastrophe.

For similar reasons, Roger Conrad, co-editor of the high-yield investment service Big Yield Hunting, advises his subscribers not to “play the game” of Wall Street which advocates selling during market downdrafts and buying during market ascents. In fact, he is a true value investor who believes in buying low and selling high:

We can use the volatility caused by stock market short-termism to buy low, and even sell high when the price is right. When you buy stocks, you’re buying volatility that can be caused by almost anything. In the end, however, these ups and downs are meaningless to your returns, unless you act on them.

The main reason I focus so strongly on company earnings is the numbers always provide the best clues to dividend safety and growth potential. When a company I own demonstrates in its results that it’s healthy and growing, odds are I’m going to keep holding. A stock with a growing dividend will ratchet higher over time to reflect that higher payout.

Big Yield Hunting Has an “Income Plus” Investment Philosophy

Whether the market continues to fall or rebounds, income investors shouldn’t care because reinvested dividends will create substantial wealth either way.

For double-digit yields, check out Big Yield Hunting, the high-yield investment service from Roger Conrad and David Dittman. Roger and David take an “income plus” approach to their recommendations. High yield alone is not enough; they demand high yield “plus” a healthy and growing business:

High yields without strong businesses behind them will be at perpetual risk of devastating dividend cuts. And they have no chance of growing either, so they’re guaranteed losers if inflation emerges.

In contrast, only growing and healthy companies will continue to pay their distributions. If we see more inflation, growth is our best chance of keeping pace. Adopting an “income-plus” strategy won’t save your portfolio from all volatility if credit or inflation conditions worsen. But it remains the best approach.

An “income plus” investment standard disqualifies many high-yield companies from Roger and David’s consideration. So far, Big Yield Hunting has recommended two Canadian income trusts, three telecommunications companies, a master limited partnership (MLP), and a fascinating stock/bond hybrid security. All of these top-notch stocks sport very high yields that are stable and sustainable.

Give Big Yield Hunting a try today!