Stock Investing For Dummies®, 3rd Edition

Chapter 9. Investing for Income

In This Chapter

• Getting familiar with income stock fundamentals

• Selecting income stocks with a few criteria in mind

• Checking out utilities, REITs, and royalty trusts

Investing for income means investing in stocks that provide you with regular cash payments (dividends). Income stocks may not seem to offer stellar growth potential, but they're good for a steady infusion of cash. If you have a low tolerance for risk, or if your investment goal is anything less than long term, income stocks are your best bet. In this chapter, I explain the basics of income stocks, show you how to analyze income stocks with a few handy formulas, and describe several typical income stocks.

Tip

Getting your stock portfolio to yield more income is easier than you think. Many investors increase income using proven techniques such as covered call writing. Covered call writing is beyond the scope of this book, but I encourage you to find out more about this technique and whether it applies to your situation. Talk to your financial advisor or read up on it — it's covered more fully in Stock Options For Dummies by Alan R. Simon (Wiley). You can also find great educational material on this option strategy (and many others) at the Chicago Board Options Exchange (www.cboe.com).

Understanding the Basics of Income Stocks

I certainly think that dividend-paying stocks are a great consideration for those investors seeking greater income in their portfolios. I especially like stocks with higher-than-average ...