It’s official. We are in correction territory. Chinese shares have erased all of the year’s gains. Dow futures dropped more than 600 points last week. And today, it dropped 1,000 points when the market opened. The natural, human response is to panic because your stock is losing value. But I would implore you, as a smart investor, not to panic.

What separates the smart investor from the average investor is your sentiment when a market correction occurs. The average investor freaks and starts selling, figuring that their money is lost forever. The smart investor knows that they still own shares in great businesses that are going to continue to reward them.

But here’s where the opportunity comes in: because everyone else is selling their stock, the prices are plummeting. If you are sitting on cash right now, there’s a good chance you can find some great companies that will make your portfolio feel much stronger. The philosophy I subscribe to is Warren Buffett’s: “When there is greed, be fearful. When there is fear, be greedy.” Therefore, you can bet Buffett is planning to buy stock right now, and you should be, too.

My advice, though, is to focus on businesses that pay dividends. The reason is because you’re buying in when the yield is higher, which allows you to accrue a greater amount of shares and more dividends per quarter. If you reinvest this money, you’ll be able to continue buying further shares much faster.

Three companies that I would recommend buying right now are Bank of Nova Scotia  (TSX:BNS)(NYSE:BNS), Enbridge Inc.  (TSX:ENB)(NYSE:ENB), and Canadian National Railway Company  (TSX:CNR)(NYSE:CNI). The reason is because these are all necessary companies that have solid fundamentals.

Bank of Nova Scotia pays a 5.14% yield and that’s definitely going to go higher as the price of the stock drops even further. That comes out to $2.14 a year in dividends that you can then reinvest into more shares of the company. And the thing is, Bank of Nova Scotia has diversified revenue sources, so this dividend is safe. It’s not going to get cut.

Enbridge pays a 3.76% yield, which will only go up. That comes out to $1.86 per share per year. Even with oil prices where they are, the companies still need to get oil from point A to point B. Enbridge is price agnostic, so it can still generate significant revenue even with a market correction and low oil prices. It’s not going to get cut.

And Canadian National Railway, while it only pays 1.78%, is still a very solid dividend to have in your portfolio. That’s $1.27 per share per year. Similar to Enbridge, this company is going to continue shipping goods around Canada and the United States irrespective of a market correction. People still need goods. The dividend is not going to get cut.

Don’t sell when others are selling

The reality is simple: when others are selling, you should not be following them. You are going to lose money that way and that’s not what we want to achieve. When there is fear, stick to your investments. If they are like the companies I mentioned above, they are solid investments and won’t have their dividends cut. Market corrections happen; dividends are your way to keep your portfolio strong.

Want more top dividend stocks for market corrections? These three top stocks have delivered dividends for shareholders for decades (and even centuries!). That means they've paid during many other market corrections. Dividends are the best way to protect yourself during these market corrections. Check out our special FREE report: "3 Dividend Stocks to Buy and Hold Forever". Click here now to get the full story!


Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.

We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.

We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!

Fool contributor Jacob Donnelly has no position in any stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. Canadian National Railway is a recommendation of Stock Advisor Canada.