Most people invest in the stock market for capital gains. They love to watch as their stocks (or crypto) prices go up and up. It is a great ride, as long as the prices keep going up. Good for them and more power to their future wealth.
I invest for income, cold-hard cash. I like to watch my bank account go up and up. I love to spend my time looking for great high-income investments and going with other blue-chip dividend payers such as Johnson & Johnson (JNJ) and McDonald’s (MCD).
So what do I consider high-yield? I would consider anything over 4% dividend yield as high-yielding, but I want to be somewhere between 7-10%. My overall goal for my portfolio is 4% capital gains and 4% dividend yield.
Stock Market Investing 106: High Yield Alternative Investments
My index funds yield roughly 1.5%, and my blue-chips are somewhere between 1.5% and 2.5%. Therefore, my high-yielding products need to do the brunt of income production. So, where do we find high-yield products?
There are a few places to find high yield. You have high-yield blue-chip stocks, high-yield ETFs, junk bonds, closed-end funds, municipal bonds, preferred shares, and REITs. Let’s take a look at each of these.
High Yield Blue Chip Stocks. High-yield blue chips can be a great way to diversify into high income without going crazy into other types of products. Ensure you are getting solid blue-chips and not buying a sinking ship. Some great high-yield companies I own are AT&T (T), Verizon (VZ), and Altria (MO).
High Yield ETFs. These ETFs specialize in buying blue chips and preferred shares, so you don’t have to buy into individual stocks. Look at their top 10 holdings and their prospectus to see what they like to purchase and hold. Some high yield ETFs I keep are Global X Superdividend (SDIV) and Invesco Preferred ETF (PGX).
Junk Bonds. Junk bonds are bonds from corporations and businesses that may not be doing so hot. Therefore, their bonds produce a high amount of income because of the interest rates they must pay to borrow money. I invest in Junk Bonds through an ETF called SPDR Corporate Bonds (JNK).
Cash Flow 105: Diversify Your Passive Income
Closed-End Funds. Closed-End Funds are my favorite place to get high-income; however, you need to know what you are looking at and buying. Here is an article on Closed-End Funds. My two favorite CEFs are Pimco High Dynamic Fund (PCI) and Reaves Utility Fund (UTG).
Municipal Bonds. Munis are a great way to get tax-free income. I like to purchase them in a closed-end fund called Nuveen Municipal Bonds Fund (NVG). Here is an article on why you should try to get some of your income tax-free via Municipal bonds.
Preferred Shares. Preferreds are a great way to increase the dividend yield of your portfolio. The central concept is to buy preferred when they are yielding high amounts. I wrote an entire series on preferred shares. You have to learn where to find preferred shares to be successful at investing in them.
Real Estate Investment Trusts. You can find some fantastic yields in REITs; however, not all REITs are created equal. You will need to know what sector the REITs invest in and also how each one reacts to inflation and low/high-interest rates. Here is my series on REITs. Some of my favorite REITs are AGNC (AGNC) and Medical Properties Trust (MPW).
Investing for Dividends 104: The Importance of Index Funds
As you can see, there are many ways to invest in high-yield products, and each one is unique. Do not buy securities just because of the yield; that is a losing battle. Know what you are investing in and why. Also, understand how it will react under stress.
If you can understand the investing thesis for each of your securities, you will be in a good position. I like to layer on index funds like Total Stock Market (VTI) and Dow Jones Industrial Average (DIA) to get some growth.
Then I also layer in a fair amount of blue-chip stocks like Starbucks (SBUX), Target (TGT), and Microsoft (MFST). Together I ensure I am getting a fair amount of growth, income, and stability. I love investing because you can have it your way. Please dig into these articles and begin your high-yield journey!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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