logo
  Join        Login             Stock Quote

The Quest For Yield (Part 6): Enhancing The Yield From Your Dividend Stocks

 March 14, 2012 12:59 AM
 


Since October I have been urging yield-oriented investors to combine the selection of good dividend stocks with covered calls. This system has been working very well, and readers have asked for more information about how to make these trades.

At the risk of giving away some information about our specific methods, I have decided to go into more detail.  I hope that readers find it helpful in meeting their risk/reward objectives.

Background

The combination of dividends and call premium will yield 10% returns +/- whatever happens to the stock.  If your time frame is a few years, and your stock picks are reasonable, you need only break even on the stocks to get a return that will solidly beat bonds and inflation.  On a total return basis you can aim to double your portfolio in eight years or so, without getting unduly aggressive.

[Related -Fusion-IO, Inc. (FIO): Can Fusion-IO Q2 Results Cheer Street?]

This is a sweet spot for many investors.  You can do it, but it will take a little work.  I have already covered several key topics in prior articles in this series.  You will do best if you check out the past articles as well as this one.  If you want this to work, don't cut corners!

Picking Dividend Stocks

A great dividend stock must first be a great stock!

Too many investors just screen for high yield.  Many of these stocks trade as a function of the yield.  It is like buying a 100-year bond.  If you think that bond yields are going higher, these stock prices will go lower.  Here is the chart I ran in my original dividend article:

[Related -Microsoft Corporation (MSFT) Earnings Preview: What To Watch In Q2 Results?]

 

6a00d83451ddb269e2013488ab0ac6970c-450wi

If the only idea you got from this article (November, 2010) was buying Caterpillar (CAT), you were in at 80.

Other stocks at the top of a pure yield screen might include companies about to cut the dividend since their payout ratio cannot be sustained by the earnings.


Next Page >>123
iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageXerox Corp. (XRX): An Insider’s $500,000 Insider Buy

Last week was a healthy week of insider buying as 194 companies reported purchase records. The number read on...

article imageQihoo 360 Technology Co Ltd. (QIHU) Q2 Earnings Preview: A Green Monday

Qihoo 360 Technology Co Ltd. (NYSE:QIHU) will report its second quarter 2014 financial results on Monday, read on...

article imageSix Stocks that Could Outperform in the next 90 days

Earlier today, Goldman Sachs put out its list of the 50 stocks that Matter Most. It’s a list of the 50 read on...

article imageFoot Locker, Inc. (FL) Q2 Earnings Preview: Running Past the Street View

Foot Locker, Inc. (NYSE:FL) plans to report financial results for its second quarter ended August 2, 2014 read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.