Thursday, July 28, 2011

Should an income investor buy, sell, or hold?

         If you are an income investor, the portion of your portfolio dedicated to income includes dividend stocks (hopefully dividend machines) and some money in bonds.  You might also own income properties; income real estate is not the subject of my blog; this blog concentrates on using bonds, stocks, and call premiums to create your required monthly income.

          The only bonds we own are from the good old days when we could get a very safe seven percent income and we often bought at a discount.  As the bonds mature, we have fewer and fewer in our portfolio.  We had to increase our use of stock dividends and call options to make the income our bonds used to make.

          We are, therefore, at more risk than we were with high quality bonds.  And, indeed, we have just lived through a terrifying time in 2008.  Since we have little control over the events that lead to wild market gyrations, we can only stick to our guns with a little more work on due diligence.

          For instance, make sure your monthly income comes from stocks that have increased their dividend every year for at least 5 years; and have a debt to equity ratio less than 1 or within the industry average.  You can further refine your portfolio to companies that have never cut their dividend.

          These are simple techniques for simple income investing.  Instead of worrying about the stock price concentrate on your income.

Very Truly Yours,

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