Many people are finding it difficult to invest amid all of the economic uncertainty. Gold prices seem to be rising every day, but buying near multi-year highs is never easy. Short selling can produce gains amid declines, but potential losses are unlimited if there’s a rally. Buying options is a great way to minimize capital outlay and still have exposure, but the high volatility has made them expensive.
Dividend stocks offer investors exposure to the market with a cash payoff over time. This cash payoff helps to reduce the investor’s breakeven point, take money off the table, and generate an income in addition to just capital gains. And the combination of depressed equity prices and record corporate cash equates to a relatively safe investment for long-term investors.
Abbott Laboratories (ABT) is a healthcare company that offers a strong 3.79% dividend yield and a stock that has risen more than 6% over the past six months. Bristol Myers Squibb Co. (BMY) is a pharmaceutical company that offers a robust 4.57% dividend yield and a stock that has risen more than 13% over the past six months. Dominion Resources (D) is an energy company that has a 4.04% dividend yield and a stock that has risen more than 8% over the past six months. Kraft Foods Inc. (KFT) is a packaged food products company with a 3.38% dividend yield and a stock that has risen more than 9% over the past six months. Chevron Corporation (CVX) is an oil and gas company with a 3.22% dividend yield and a stock price that has fallen about 6% over the past six months.
Investors can also consider creating “synthetic dividends” by writing out-of-the-money covered calls against any existing stock positions. The premiums obtained from these positions can provide the same benefits as a dividend – a reduced breakeven point, money off the table, and a passive income. The worst case scenario is that the investor will have to sell the stock at the higher price.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.