Investing in dividend stocks is an extremely popular way of investing in the stock market because it helps you to get an income. Everybody loves getting cash flow because that is what we all need to survive in this world.
So, what in the world is income investing? Some stocks wil pay out a percentage of their earnings to their stock holders in the forum of a dividend. These stocks help the stock holder to benefit from a company that is making money.
So, by finding a list of dividend paying stocks that are all stable or better yet growing companies you could potentially get a very nice cash flow with very little work. There is just one major problem to this strategy, you need money to make money.
For example say you want to invest $10,000 into a dividend stock that pays 5% annually that means you would get a cash flow of around $500 a year. To get anything liveable from dividends you are going to have to invest a lot of money.
So how can you possibly get around this? Is there any way to make a good income off of your investments in the stock market without already being rich? Well one way to drastically increase your income from the stock is by selling covered calls.
Instead of making 5% in a year off of dividends you may make 5% in a month with covered calls. It goes without saying that this is a powerful way of investing, but it is not without it’s own risks.
If you sell a covered call then you will be obligated to sell your stock at a specific price on or before a given date. So if you sell the $40 call on your stock and it goes up to $50 you would be forced to sell it at $40 missing a god chunk of the possible gain.
While there are some downsides to selling covered calls is can be a great way to increase your gains when investing into dividend paying stocks.
