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This Income Strategy Crushes Dividend Stocks’ Returns

This Income Strategy Crushes Dividend Stocks’ Returns

Adding an income strategy to your portfolio is the secret to building wealth.

Income strategies have helped investors like Bill Ackman and Warren Buffett grow their funds dramatically.

If you’ve followed the markets at all, you know stocks don’t move in a straight line.

In fact, stocks trade sideways 80% of the time.

If you aren’t collecting income during sideways periods, you’re likely limiting your gains.

For example, the S&P 500 Index with dividends is up 501% over the past 20 years.

Without dividends, the return is only 305%.

That’s a HUGE difference. It shows why compounding income is so important.

But holding dividend stocks is just one way to boost the income in your portfolio.

And it’s my least favorite.

Dividend Stocks Are Overrated

Here are a few reasons why I don’t like dividend stocks:

  1. Dividends aren’t free money.

The market expects them, so you’ll usually see the dividend amount subtracted from a stock’s share price when paid.

  1. Dividends are taxed as ordinary income.

Depending on your annual earnings, dividend income can carry a higher tax rate than an equal amount of capital gains.

  1. Companies that pay dividends are generally low-growth companies.

Most high-growth companies don’t pay dividends. Instead, they use capital to expand their businesses.

Companies with lower growth prospects tend to return capital to shareholders.

I’m not telling you to avoid dividends altogether. I just think there are better ways to build income.

Especially when the S&P 500’s dividend yield is a measly 1.3%.

The Right Way to Create Income

My favorite income strategy? Options trading.

Options trading can create a steady income stream that far surpasses income received from stocks.

You may be familiar with options trading. But most traders are going about it all wrong.

Instead of using options to create income, they use them to speculate.

In my mind, speculating is the wrong way to trade.

I was excited when Ian King began working on a strategy that uses options the right way.

He calls it the Profit Frame.

So far, the results have been amazing. He’s already built up a 78% win rate.

We’ll have more info on Ian’s special strategy later this week in Winning Investor Daily.

Stay tuned for how you can be one of the first to see this system in action.

Regards,

Steve Fernandez

Research Analyst, Strategic Fortunes

 

Morning Movers


From open till noon Eastern time.

 

Zynga Inc. (Nasdaq: ZNGA), the mobile-gaming company, is up 44% this morning. The move came after video game publisher Take-Two Interactive Software announced its plan to buy Zynga in a cash-and-stock deal worth $12.7 billion.

 

IRhythm Technologies Inc. (Nasdaq: IRTC) is a digital health care company that provides ambulatory electrocardiogram monitoring products for patients at risk for arrhythmias. It is up 26% today on a rebound from last week after Morgan Stanley raised its price target on the stock.

 

BioCryst Pharmaceuticals Inc. (Nasdaq: BCRX) discovers and develops oral and small-molecule medicines. It is up 21% after reporting preliminary revenue in 2021 and providing guidance for 2022 for its drug ORLADEYO.

 

Discovery Inc. (Nasdaq: DISCB) is the media company parent of networks like the Discovery Channel, HGTV, Food Network, TLC and Animal Planet. It is up 17% on the news that it is acquiring a minor stake in OpenAP, an advanced advertising company.

 

Tilray Inc. (Nasdaq: TLRY) engages in the research, cultivation and distribution of medical cannabis products. It is up 14% after reporting Q2 results that beat analyst estimates thanks to surprise profits from cost-cutting measures.

 

CareDx Inc. (Nasdaq: CDNA) discovers and develops diagnostic solutions for transplant patients and caregivers. It is up 10% after reporting preliminary revenue results for Q4 and full-year 2021.

 

Playtika Holding Corp. (Nasdaq: PLTK) develops mobile games internationally. It is up 9% today, trading in sympathy with Zynga on the news of its acquisition.

 

Moderna Inc. (Nasdaq: MRNA), the COVID-19 vaccine maker, is up 9%. The move came after the company improved its forecast for 2022 vaccine sales from the initial estimates provided in November.

 

Nevro Corp. (NYSE: NVRO) is a medical device company that provides products for patients suffering from chronic pain. It is up 8% after reporting preliminary Q4 and full-year 2021 revenues.

 

Country Garden Services Holdings Company Ltd. (OTC: CGSHY) is a Chinese property developer that is up 7% today. The stock moved on the news that based on 2021 sales, Country Garden has now overtaken China Evergrande as the largest property developer in China.

 

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