As long-term dividend investors, our goal is to maximize income while also protecting and maintaining our capital base. That said, dividend investors often struggle with the decision of when to put new money to work. Sitting on idle cash is hard (because it is not generating any income), but it's also difficult to buy a stock that has run up significantly (as downside risk is higher). The great Benjamin Graham ("the father of value investing") popularized the term Margin of Safety in 1934. According to Graham, an investor should only purchase a stock when the market price is significantly below its intrinsic value. Essentially, a Margin of Safety provides room for error on an investor's purchase decision. Ideally, we would only buy stocks that have a Margin of Safety...but in reality that isn't always possible.
A cash-secured put involves writing an at-the-money or out-of-the-money put option and simultaneously setting aside enough cash to buy the stock. We believe that selling cash-secured puts is a great, conservative way to generate income while patiently waiting for the appropriate "Buy Zones" on dividend stocks that you are considering adding to your portfolio. Balancing income and capital preservation is extremely important for income investors. Maximizing income is clearly important in the short-term, but capital preservation is critical over the long-term (as this is your means of generating future income). A cash-secured put strategy is a great compliment to a long-term dividend portfolio as it will help you generate income on idle cash with a built-in margin of safety.
Source: Seeking Alpha
Related Articles:
- 7 Dividend Stocks With Room To Increase Their Payout
- High-Quality, Low-Risk Dividend Stocks
- 10 Stocks Building Wealth Through Higher Dividends
- 10 Dividend Stocks With A 10% Yield In 10 Years
- Are ETFs and CEFs Good Dividend Growth Investments?
The Best Way To 'Buy The Dip' For Income Investors
Posted by D4L | Thursday, June 18, 2015 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
~
Popular Posts Last 30 Days
-
If you're worried about inflation rearing its ugly head next year, you should probably worry about more likely catastrophes, such as bei...
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
When a company pays a dividend, it's a good thing for shareholders. When a company consistently pays a dividend every quarter, it's ...
-
We screened our 24/7 Wall St. dividend equity research database and found 5 stocks that combined can generate over $3,000 of annual passive ...
-
The stock market has been on an upward path of late, with some of the most prominent stocks hitting astronomical highs. The dividend yield o...
-
My top financial goal is to eventually become financially independent. The foundation of my strategy is to make investments that produce an ...
-
Dividend growth stocks can be incredibly attractive investments if you crave recurring income. As these types of stocks raise their dividend...
-
In my opinion, there are three criteria investors should consider when evaluating a particular stock for their portfolio. The first is histo...
-
In this article, we discuss 5 best March dividend stocks to buy. If you want to read our detailed analysis of dividend capture strategy and ...
-
Double your money in a short time. Few investors would walk away from such an opportunity. Of course, there's no guarantee that any inve...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.