Personal Economics 101

Certain ETFs used covered calls to generate extra income, which are returned to shareholders as dividends. With most of these ETFs, income is the priority; capital gains are secondary. One example of this type of ETF is QYLD , Nasdaq 100 Covered Call ETF. Some, such as QYLG and XYLG, only sell calls on about 50 percent of their holdings in order to increase the possibility of gains. One EFT, NUSI, also write puts, as a hedge against a bear market. (Note: The possibility of gains also increases the risk of losses, so judge accordingly.) If you're looking for income, you should consider one or more of these ETFs. Note that QQQ and SPY, which as pure equity plays, had great returns, but the markets were up last year. This would be different in a down year. Also note that these covered call ETFs are new enough that they have not been tested during a bear market.  Consider that the volume on some ETFs, such as XYLG, has a daily average volume of less than 10,000 shares. This will cause...

From Charles Schwab, Inc. Inflation continues to be a concern these days, and many investors are looking for investments that can keep pace with, or hopefully beat, the rate of inflation. As a result, Treasury Inflation-Protected Securities, or TIPS, have become a popular investment option. But investing in TIPS isn't always straightforward. They have many unique characteristics that can make the investing experience a bit confusing. Here are answers to some of the most frequently asked questions about the TIPS market: 1. What are Treasury Inflation-Protected Securities? Treasury Inflation-Protected Securities, or TIPS, are a type of U.S. Treasury security whose principal value is indexed to the rate of inflation. When inflation rises, the TIPS’ principal value is adjusted up. If there’s deflation, then the principal value is adjusted lower. Like traditional Treasuries, TIPS are backed by the full faith and credit of the U.S. government. Although there are many measures of inflatio...

By Rida Morwa Seeking Alpha In the last two days, we have seen extreme panic among income investors rushing out of the door and dumping their shares of AT&T (T) after hearing about the announcement of a dividend cut following the AT&T/Discovery transaction. The shares of the company are down by 8% in the past two trading sessions. This panic has created a great buying opportunity, and we explain why. AT&T decided that they would be acquiring Discovery (DISCA) in a "Reverse Morris Trust transaction." Essentially, T will be spinning off WarnerMedia and all of its assets into a new company that will be owned 71% by current shareholders of T and 29% by current DISC shareholders. The market's initial reaction to the merger was broadly positive until panic hit the market about the divided reduction, without looking at the big picture. The Dividend The dividend will be reduced. From the conference call, CEO John Stankey said: The transaction is expected to be tax-fre...

This is a good video explaining the principles of dividend investing. In my own portfolio, my own focus has been on dividend, or income, investing for the last few years. I'm getting $12,000 in dividends annually on less total assets than this video says you need, but with more risk. Check it out.

Over the last few months, I've moved funds from my cash positions into the energy sector. My strategy is to buy quality at low prices while collecting the dividends as my strategy is long-term (3 to 5 years). All in, the oil sector looks like a terrible place to invest today. Unless, of course, the company you buy has the financial strength to keep investing in any environment and the track record to prove that it can and will do just that. Which is where Exxon and Chevron come in. These two industry giants have long histories of navigating the oil industry's ups and downs with relative ease. One place to see that is in their dividends, with each having increased their disbursements annually for more than three decades. Clearly, these companies know how to deal with industry downturns while still rewarding investors. That is largely because they don't focus on short-term gyrations, instead looking to the long-term supply/demand dynamics of the industry . They know tha...

Recalling the Battle of the Bulge Seventy-five years ago, at the Battle of the Bulge (fought from Dec. 16, 1944, to Jan. 25, 1945), the United States suffered more casualties than in any other battle in its history. Some 19,000 Americans were killed, 47,500 wounded and 23,000 reported missing. Stock Picking is Hard. Deciding What Kind of Investor You Are is the First Step For new investors, the universe of investing can feel a little like the ancient terracentric paradigm. Daily stock prices are quoted. Big movers are highlighted on television. But why stocks are moving remains mysterious. Government Mandates and Crummy Dishwashers American dishwashers used to work. They were wonderful labor-saving devices. They kept our kitchens cleaner. They sanitized the dishes, helping to stop cross-contamination and generally improving health over the iffy process of handwashing. …Then one day they just stopped doing the work. What happened? In 2020 Climate Science Needs To Hit the Res...

In a recent article U.S. News and World Report recommended 11 stocks that pay "great" dividends. Here's my take. The whole purpose of this exercise is to illustrate that while a lot of people are making recommendations, only you can do the research and exercise due diligence before investing your own money. My recommendation if you're looking for yield is to search for an ETF that offers decent yield, and can spread the risk among dozens of companies. While you might get a little less yield, you get less risk. Altria Group (MO) Current Yield: 6.7% Besides investing in cigarette brands, its PE is twice the sector average, earning are not growing and its dividend payout ratio is high. Sales and earnings growth is anemic. I would avoid. Macherich Co. (MAC) Current Yield: 11% This is a REIT that invests in malls. That for me says no. There are better REITS out there. Macy's (M) Current Yield: 9.9% At one time, Barron's recommended Macy's when it ...

I don't normally invest in individual companies -- though I will make exceptions. I'm retired so my days of high-growth investing are mostly over; having said that, I still want some growth in my portfolio. But I want income, and besides bonds, which are pretty boring, I like dividends.   But if you're investing for dividends and you're investing in a company, you must insure dividend sustainability. When a company reduces or suspends its dividend, the normal result is the stock will tank, erasing all your gains and creating a loss.  (This is why I'll invest in an ETF that focuses on dividends, especially if they pay out monthly, which individual companies don't do. This spreads the risk around). The most important factor is a company’s payout ratio. This is the percentage of net income a company pays its shareholders as dividends. The lower the payout ratio, the safer the dividend payment. The second factor is the company’s debt-to-equity ratio...