I started my job at Citigroup in London in April 2000... a month after the Nasdaq bubble burst and the beginning of the worst bear market in stocks since 1973-1974.

As a junior accountant, my first job was dividend control. I made sure hundreds of Citigroup stock traders received the correct dividend payments on the positions they held. And when investors didn't get what they were owed, I contacted Citigroup's clearing department and made the claim.

I remember one trader, Nick Rubeiro. He ran an emerging-market high-yield strategy from a desk in New York. He had the most obscure companies in his portfolio, and they always tripped up the computer systems.

"Mol Magyar pays tomorrow," he'd say about the Hungarian oil company. "I'm holding 100 million shares."

Then I'd find out he actually owned 125 million shares. That's a $7.5 million dividend.

I saw dozens of traders come and go on the trading floor that summer. The market was an absolute bloodbath. But every week, I'd get the same call from New York Nick chasing his missed distributions.

Economists define a bear market as a 20% drop in the S&P index. The S&P is the index of the 500 largest companies in America. So it's the best way to determine how American stocks are behaving. In 2008, the S&P entered bear-market territory for the first time since 2002. As I write, the S&P is down 20% since October 2007... but it was down more than 25% two weeks ago.Nick's quarterly dividend payments became something of a symbol for me that summer... like a pillar of strength amidst all the carnage of the stock market. They pulled me off dividend control later that year and sent me to fixed income. But I never forgot about Nick's dividends...

This is only the fifth time in last 100 years we've seen a 25% or greater decline in the S&P 500.

But while everyone else panics, subscribers to my 12% Letter are keeping calm. In the middle of one of the five worst bear markets in 100 years, the stocks in The 12% Letter portfolio continue to pile on the dividends...

High-dividend stocks are defensive by nature. The dividend acts like an anchor and prevents a stock price from falling too far. As stock prices fall, yields rise... enticing investors to buy the stock. This is only if the company maintains or raises its dividend. These are the companies we buy in The 12%Letter. In weak companies, a high-dividend yield is a warning sign. I especially like companies with long track records of rising dividends through many economic cycles...

We piled into defensive assets like timberland, Canadian energy, coal, pipelines, and rural telecom... and made gains of 15%, 71%, 80%, 9%, and 6%.For example, we've made 53% on McDonald's and 23% on Wal-Mart as consumers have tended toward low prices. Wal-Mart has 30 years of unbroken dividend growth. McDonald's has 29 years.

The current positions in my portfolio are up 9% on average... and paying 10% annual dividends... in a bear market.

As I wrote in Wednesday's DailyWealth, over 400 stocks are trading in U.S. markets with yields above 7%. Now is a great time to be buying high-yield stocks. They'll shelter your money from the bear market... while generating double-digit returns.

Good investing,

Tom