My mission is to create an investment portfolio that is focused on receiving measurable returns through the receipt of immediate income
If I were creating a pyramid of investment income the base, and thus most important part, would be creating a portfolio of dividend growth of it all, in my opinion, would be creating a portfolio of dividend growth investments. These businesses will have increased their dividend for at least 20+ years, and at the time of the purchase will be undervalued with regard to certain metrics:
- The company’s P/E will bless than the industry average, and no matter what less than 20; and
- The company’s Operating Margin will be more than the industry standard; and
- The company’s Price to Book will be less than the industry average; and
- The Yield will be over 2.4%; and
- The payout ratio will be less than 60%.
My monthly screens are ran only once a month because of the time they take to put together. Currently, I am buying $500 lots once or twice a month as my income allows me, and all dividends will be reinvested.
The next level of the pyramid is selling out of the money short puts. The puts will be sold on stocks that:
- Have a P/E of less than 20; and
- Yield of at least 2.5%; and
- Payout ratio of less than 60%
There will be a cushion between current price and the strike price that has only been hit a few times over the past few years. Anytime I can buy the contract back for 50% (including fees if applicable) I will. There will be other self imposed restrictions to build in safety. All net premiums will be reinvested the next month in my monthly lot purchase.
The last level of the pyramid will be selling covered calls against my positions. The covered calls will be way out of the money. All net premiums will be reinvested the next month in my monthly lot purchase.