Income Investing is a concept that many savvy investors are familiar with. And many of our clients know that this is our approach at Capital Investment Advisors.
Here’s a few quick reasons on how and why we focus on generating income for our clients.
First, we focus on income investing in using three primary methods:
1. Investing in dividends from stocks
2. Investing in interest from different types of bonds
3. Investing in distributions from other sources like closed-end funds, master limited partnerships and royalty trusts.
Our focus on these three income sources is based on the fact that they deliver income independent of the market price of the security. Despite movements in the price of a stock, bond or CEF, the dividends, interest and distributions should largely stay the same. For example, if a client has one million dollars worth of income producing securities paying a 4.5% yield that generates $45,000 per year – regardless of what happens to the portfolio’s underlying value.
When we invest on our client’s behalf, we look at a stock’s dividend sustainability, ability to grow the dividend, and then the potential for capital appreciation. Our investments are based on the best portfolio and value to the client (see our article on registered investment advisors).
This strategy makes a huge difference for our clients. Even in the midst of bank bailouts, real estate plunges, and stock market crashes, through income investing you can still generate a steady income stream even though the value of your portfolio may have been down. This frees you from the psychological stress of riding the ups and downs of the stock market.
If you have questions about how to incorporate income investing options into your portfolio, please ask an advisor today.