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A Simple Approach To Double Your Dividends

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A Simple Approach To Double Your Dividends

In the contemporary business world, dividends play a vital role for investors.

The income generated from this financial tool is entirely dependent on its utilization.

What many individuals do not know is that there is a way to increase the proceeds from dividends, or better yet double them by using a particular business strategy.

What if there was a sure way of creating 8% income generating stocks from 3% yields?

That would be every investor’s choice provided it does not involve any risky techniques or leverage practices.

Fortunately, there is a strategy that can enable one to get such returns from dividends.

The enigma of covered calls is one of the best approaches that would allow one to convert blue chip stocks into cash-generating ATMs. 

In this technique, we have tools like call options that are a form of insurance which cover stocks beings traded at a particular time.


Here, it is possible for a trader to sell this insurance for money without the risk of losing the capital.

The trade in means that it is possible to trade in these stocks without worrying about the additional funds in capital investments.

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Find and Trade the Appropriate Stock

It seems obvious that many people in their retirement would prefer to trade in covered calls, but this method has its flaws.

For starters, it is tough for one to identify the right stock that would be suitable for this technique.

But, no one is able to boost their income without taking some risks.

The best method would be to find stocks that have high dividends with an element of volatility.

Moreover, a relative price that is neither too high nor too low would serve as an essential factor for such a framework.

An investor can, therefore, evade the risk of forcefully selling the shares of their stocks at the stipulated price depending on the strike price in question.

Consequently, it would be possible for a financier to trade on the same stocks using the same call strategy for years without worrying about financial risks.

We do not have to place our concern on rising stock prices when using this approach.

As a matter of fact, a trend that does not record any increments in prices is the best scenario when using this method.

High volatility would mean that the premiums charged on options would be relatively high meaning that one would expect increased income levels.

Taking a Different Approach

Over the recent past, AT&T (T) has made a reputable name for itself with a recorded stock price that has remained in a fixed range. Unlike other stocks, its lowest was $32 whereas it’s highest so far is $38.

There is no doubt whatsoever that this scenario enables a person to collect premiums from the sale of calls without the market assigning your stock. Although there have been fluctuations, it has remained to be one of the best assets to trade.

The company’s changing nature, mostly arising from its acquisitions, have rendered its history useless when it comes to predicting the price of the covered-call stocks.

Verizon

When looking for a sure way to earn more, Verizon is the best option.

It has unsurpassed qualities with a strong, established framework that has made it trustworthy over the years.

With a reliable business model, high dividend coverage and excellent management, VZ has managed to double the dividends for years with an astounding 2.7 % increment at the beginning of 2016.

Even though this company pays a good dividend rate of 4.87%, the company has still not managed to beat AT& T.

Its range falls between $45 and $55, meaning that people will still earn a good amount using this company that continues to scale the heights of success as years go by.

Altria group

The third alternative that has managed a sound record in the tobacco industry is the Altria group (MO).

With a dividend payment of 3.5%, this company has an unbeatable global record when it comes to covered calls.

However, its main setback is that it has been going up as a result of its outstanding innovations and developments.

It is evident that this situation is bad for sellers as they would need to be very vigilant when selling their calls.

The case left many investors with the option of studying the company’s trends to come up with a prediction of the stock prices.

For instance, one can assume that since the stock has been going up by 10% from January, then it follows that it will continue to go up by another 10% by the end of the year.

This move, however, conservative bearing the fact that the premium for such a strategy would only be 93 cents.

In the long run, a total return of 11.5% would have been made by the expiry period.

A Stress-Free Approach

You might be disarrayed by all the options above.

It is paramount to note that the transaction costs, including the brokerage commission charged on the calls sold, might be overwhelming for an average investor. These costs are in most cases higher than the cost of trading stocks.

You do not need to worry anymore.

These problems are taken care of using the closed-end funds. These are buywrite funds that employ the use of an automated system that buys and sells calls against a particular stock.

One of the main perks associated with this method is that the taxes and strike prices are managed by a professional, thereby increasing the chances of increasing the dividend yield.

There are three primary assets under management in the closed-end funds category.

They are:

  •  Eaton Vance Tax-Managed Global Fund (EXG) (11.2% yield pay)
  • Eaton Vance Tax-Managed Dividend Equity Income Fund (ETY) (9.8% yield pay)
  • BlackRock Enhanced Equity Dividend Fund (BDJ) (7.4% yield pay)

Boost your Returns

It is, therefore, imperative that people take a careful look at these profitable strategies so that they can identify the best alternative that suits their needs.

Don’t be left behind, try this method out to guarantee an increase in your dividends, and help you attain your goals.

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