How to Get Better Returns from your Dividend Stocks
Dividend investing can be a good way to create some passive income, yet it is not without some drawbacks. Like every other strategy there are good parts and bad parts about it.
The nice thing about income investing is that you are not counting on the stock to make a big move to be profitable. The company just has to not go down.
It is also a lot easier to manage a dividend portfolio because you simply have to find a List of dividend paying stocks and only investing in the ones which give you a great payout in a stable company.
The only disadvantage to this strategy is that it tends to keep you narrow sided. Simply by only investing in stocks with the highest dividend you may run the risk of not getting into the best investment. Many times stocks that offer a high dividend only do because they are bad investments and there would be no one would invest in them if they did not.
One way to solve this problem is by using techniques such as the PE ratio to help pick stocks that are likely to appreciate in the near future. This lets you create your own guidelines which will help you determine what stocks are just not worth getting into.
The other disadvantage to regular dividend investing is that you lose sight of other ways of pulling money from the market. Selling naked puts and covered calls can be much more profitable then dividends.
These reasons are why instead of just buying the stock that gives off the highest dividend; I like to look for stocks which offer great dividends, great fundamentals, and high option premiums. That way I can win in all 3 ways.
