Like A Stock With A Low Yield? No Problem…
I read a lot of research reports every day. Recently, I came across a report from Goldman Sachs that was interesting.
This month, for the first time since January, institutional investor sentiment turned bullish. Goldman’s QuickPoll survey found 41% of participants are slightly bullish or bullish, while 38% of participants are being slightly bearish or bearish.
The big news that a plurality (45%) cited elections as the primary driver of markets, surpassing COVID epidemic data and vaccine developments (36%) which has held the top spot since February. No matter who wins, a majority believe that there will be a second round of stimulus from Congress.
I agree with the idea that there will be another round of stimulus before the end of the year. But I’m not ready to be bullish yet. I expect extreme volatility around the election, similar to what we saw in 2016.
You might remember that the Dow Jones Industrial Average dropped significantly on the news that Trump was elected and then rebounded sharply at the open. That’s possible again and I will be ready for that. I’ll have more thoughts to share on my election strategy in the coming days.
How I’m Trading Right Now
In the meantime, it’s still possible for investors to earn meaningful income in this market. And that’s why I’m recommending conservative trades with stocks like CyrusOne Inc. (NASDAQ: CONE).
We’ve traded CyrusOne before over at my premium service, Maximum Income. CONE provides data centers for about 1,000 customers around the world. Data centers are complex structures that require redundant power and connection sources along with backup computer capabilities.
Revenue for the past 12 months topped $1 billion and has been growing steadily at an average of more than 20% a year.
Now, it’s important to remember that CONE is a real estate investment trust (REIT), or a company that owns, operates, or finances income-generating real estate. To qualify as a REIT, the company is required by the IRS to pay a minimum of 90% of taxable income as dividends very year.
That’s great news for income investors. The dividend of $2 a year continues to seem safe since funds from operations more than cover that. Liquidity is not a concern since no debt repayment is due until 2023.
All the good news explains how the stock rebounded from this year’s selloff. The stock recently sold off and then bounced off important support near $70, which coincides with a 38.2% retracement level.
This is a Fibonacci retracement of the advance from the March bottom. Fibonacci levels are widely followed by large hedge funds and that makes them important. If the stock declines to this level again, there is likely to be significant buying, and that reduces the risk of this trade.
Action To Take
At recent prices, the $2 dividend I mentioned earlier puts the yield at about 2.6%. So the yield may leave a little to be desired for some income-minded investors. That’s okay though, because we’re going to earn what I call “bonus dividends” with this trade over at Maximum Income.
Few investors know this, but the truth is, you can earn extra income from most stocks on the market — regardless of the company’s dividend policy. All you have to do is own at least 100 shares and sell a covered call option.
It’s incredibly simple to do this. You don’t need to be a sophisticated trader. And it’s not overly risky, either. Frankly, other than simply not knowing it exists, I don’t know why more investors don’t take advantage of it. It’s practically money left on the table.
I still remember the day I learned how to use covered calls. I didn’t waste any time using it, and before long I was using them to earn thousands of dollars in extra income each and every month.
I started sharing my insights with my Maximum Income subscribers a few years ago, and now they’re earning thousands in extra income every month, too.
If you’d like to learn more about how covered calls work, then I invite you to check out this report.