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There are numerous types of investment philosophies that are used by the investing public and professional advisors. One such investment discipline is referred to as “income” investing. The purpose of this post is to provide certain general information concerning this strategy. This post is not designed to be complete in all material respects. It is being provided for educational purposes only and should not be relied upon as legal or financial advice. If you have any questions relative to the below discussion, you should contract a qualified professional relative thereto.Income Investing
The premises behind income investing is to pick companies that provide a steady stream of income. This can be accomplished in various ways such as investing in:
Obviously, as with all investment strategies, there are varying degrees of risk associated with this concept, which are enhanced by the use of margin and the active oversight of the positions in one’s account.
The balance of this post will focus on income generated by common stocks.
Income investors usually focus on older, more established firms, which no longer are in rapidly expanding industries and so instead of reinvesting retained earning into themselves and pay out retained earnings as dividends.
As a starting point to try and identify such companies, there are a number of things that a potential investor can review. he following list identifies a few:
Income investing is not based, on the concept, of investing in companies that pay the highest dividends.The more important factor is the dividend yield, which is calculated by dividing the annual dividend per share by the share price.This measures the actual return that a dividend gives the owner of the stock.Dividend Policy
It is important for the investor to know what the company’s past dividend policy has been.Income investors must attempt to determine whether a company that they are looking atcan continue paying its dividends.The longer that a company has been paying a good dividend, the more likely it will continue to do so in the future.Other Factors To Consider
Even though you are looking for income, it is important to keep in mind that these yields are only worth something if they are sustainable.Consequently, income investors must be sure to analyze their company choices carefully, buying only those that have good fundamentals.Please Note