There is no better feeling than when a stock with a large and stable dividend goes “on sale.” The knowledge that a dividend will continue to be paid makes it easy to buy shares when the investing public is selling. You’re getting that same future dividend stream for a lower price
And that’s exactly what is happening today. The current stock market correction has turned one of my favorite high-yield stocks into a great buy…
I tell my subscribers that the tracking and focus should be on the income stream with a high-yield investments strategy. Investing for income allows you to take market timing out of the equation. Anytime you buy shares of an income investment, you grow your income stream.
An example based on the recent stock market downturn shows the power of high-yield investing. One of my favorite high-yield stocks (to be revealed below) pays a $0.48 per quarter, which works out to $1.92 annually per share dividend. That dividend rate has been paid for eight consecutive years.
This stock has a 52-week high of $27.01 per share. If you bought at that peak, your yield on cost would be 7.11%. That means an annual income of $711 on a $10,000 investment in money terms.
Currently, the stock trades for $23.50. It has gone through quite the tumble over the last few months, matching much of the rest of the stock market. At this price, the shares yield 8.17%. On $10,000 invested, the annual income will be $817. That works out to 15% more income than earned at the higher share price.
The point is not to wait for lower prices. It’s impossible to predict share price swings. You can buy shares at any time and start earning an excellent, high-yield income.
But share prices swing through a cycle. There is not a stock out there that does not go through declines. The share prices of good companies recover. Share prices of stable dividend-paying stocks always recover, too.
As a result, buying more shares when one of your high-yield stocks drops in price gives you the benefit of more income and a higher yield. It averages down your cost and builds your wealth as the share price recovers.
The stock I am discussing today is Starwood Property Trust (STWD). I have added shares of STWD to my retirement account over the last four years. My average cost is around $17.00 per share by investing steadily through the share price swings. I added a few shares last week.
Starwood Property Trust is not a dividend growth stock. You can count on a 7% to 8% yield with it. CEO Barry Sternlicht often discusses the importance of supporting the dividend, and the EPS continues to grow, providing more and more coverage of the dividend. STWD is an outstanding stock to own and a great example of how high-yield investing lets you stop worrying about whether the market is down or up. I research and recommend about 30 similar, but diversified, income-focused investments for my Dividend Hunter subscribers. To see how to gain access to that list of stocks, click here.