Income investors often set a minimum dividend yield as a requirement for their buy decisions. That eliminates a number of stocks from consideration. This requirement could also increase market risk since it tends to limit investments to just a few sectors. A diversified portfolio should hold more than large drug companies and big-name tech stocks that are no longer growing rapidly but are paying large dividends. Covered calls can increase the number of stocks that income investors can select from and help them diversify their portfolio without sacrificing income. A covered-call strategy involves selling… Read More
Income investors often set a minimum dividend yield as a requirement for their buy decisions. That eliminates a number of stocks from consideration. This requirement could also increase market risk since it tends to limit investments to just a few sectors. A diversified portfolio should hold more than large drug companies and big-name tech stocks that are no longer growing rapidly but are paying large dividends. Covered calls can increase the number of stocks that income investors can select from and help them diversify their portfolio without sacrificing income. A covered-call strategy involves selling call options on a stock you own. Selling calls generates instant income known as a premium. A covered call allows you to participate in the upside of the stock, while the income will help offset any downside. This is an excellent strategy for income investors to consider, and I want to use an example of a trade I like right now to illustrate the amount of income that is possible. Arkansas Best (Nasdaq: ABFS) is a trucking company that has been around since 1935. It operates about 3,700 tractors and 20,000 trailers in long-haul and local pickup… Read More