ENGINEERED INCOME INVESTING
Creating High Yield Income From Low Risk Dividend Stocks
As a former Chief Operating Officer, Director, Vice President and General Manger of Oil and Gas for Southern Pacific's Oil and Gas Operations, business owner, geologist and cribbage player, I've been an investor for over 48 years. I've learned my lessons the way that makes them stick; through hard knocks and both big and little mistakes. Hopefully I can share some of those lessons with you.
I am a retired American expatriate now living in Brazil. As an early retiree I invest for income and manage portfolio risk by screening for strong and reliable historic data along with favorable fundamental and technical current trends.
"I find quality dividend stocks, fair value, and use covered options to boost yield to 8% - 20% range. Low risk stocks transformed to high yield income"
My investing is for income and appreciation with a balance of low to moderate short term risk and low long term risk. To accomplish this I use quality dividend payors with a long track record of steady or increasing dividends along with slowly appreciating equity prices. I target a 6 - 9% yield and almost exclusively require a minimum history of 5 years of steady/increasing dividends, and no decreases in dividend ever - or at least over the past 10 years. I diversify through sector, country and currency unit the stocks are traded in, and security type (equity, royalty trust, REIT, mlp, etf, and ADRs).
I use covered call writing to enhance my portfolio yield with no added risk. In fact, it lowers the risk substantially. Once I identify a stock I want to own and an entry price for it, I write cash covered puts at or below that entry price (with a minimum of 1% per month time premium). This allows me to obtain at least a 12% annualized yield before compounding - from the option premium alone.
Likewise, I use the sale of cash covered puts to generate income and generally get an entry point at 5 - 10% below my acceptable entry level price if/when the put stock does get presented. Thus, my strategy provides a 12% pre-compound yield on cash, and entry into stock purchases at a 5 - 10% discount from retail.
Because I only select stocks that I am willing to hold long term for their reliable dividend yields of >6%, I am not concerned with market volatility or short/midterm risk. In fact, market volatility is my friend since it increases the premiums paid on the options I sell. I also selectively sell covered calls on positions I hold long. This adds to my yield and keeps me from taking on any additional risk.
This strategy has kept me comfortably living off my portfolio income, allowing me to travel extensively and enjoy my retirement in Brazil. I look forward to sharing more of my strategies and guiding you through my process, and encourage you to subscribe for a more in-depth look at my method.
Seeking Alpha's Outstanding Performance Award 2015
Richard Berger won Seeking Alpha's reader-nominated Outstanding Performance Award in 2015, beating out nearly 50 authors and over 100 submitted articles with his short idea on Petrobras (NYSE:PBR) published in September of 2014.