If you are looking for low-risk low-reward dividend stocks, this article is NOT for you. However, if you’re looking for higher income yields, and risks that are tilted in your favor, then you may want to consider the ideas highlighted in this article.
Artificially low interest rates have pushed many investors out of traditional fixed income categories and into high-dividend low-volatility stocks such as AT&T. But as many of these stocks start to look expensive, some investors are now reaching into covered call strategies to eke out some extra income. In this article, we highlight five big income options that we like more than AT&T covered calls.
Verizon and AT&T are big dividend, low volatility, stocks that are exposing themselves to new risks as their business models evolve. Yahoo recently announced it is considering a sale of its core business, and if Verizon or AT&T were to acquire it (which they might), they’d cut its costs to the bone just to feed their big dividends. Verizon and AT&T shareholders should be aware of potential dividend policy changes and price return differences as the companies take on new risks.
Many investors own AT&T for the high dividend yield, but management realizes that free cash flow will eventually not be high enough to cover the dividend payments.