Income Without the Dividend: A Strategy for Generating Income in a Down Market

As an investor, it is getting harder and harder to put new money to work in the current market environment. The U.S. economy continues to have significant headwinds (e.g., high unemployment, end of QE2, weak housing market, high debt levels, etc.) and signs are definitely pointing toward further weakness in the equity market. If you are an income investor utilizing dividend stocks for income, you are in a precarious position. If the equity market experiences a significant downturn, all stocks will likely decline in price (even high quality dividend stocks), and there is a chance that your entire dividend yield could be wiped out by a falling stock price (over the short-term). Generating Income in a Down Market We think that selling cash-secured puts on high-quality dividend stocks is a perfect strategy for a conservative income investor in a down market. It allows investors to generate income while mitigating downside... Read more