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Editor’s Note: Today’s Income & Prosperity is a classic from High Yield Wealth newsletter editor Andy Crowder.
Today I’d like to show you how to generate your own dividend using one of the most popular stocks the market has to offer, Apple (NASDAQ: AAPL).
Most investors don’t realize they can produce income on investments they already own. It’s one of the most overlooked sources of income in the investment world today and when coupled with a great company like Apple you have a solid source of income for years to come.
So what if I told you that you could increase your income and dividend on AAPL by 400% or more each year? And what if I told you that you could collect this extra income every 45 days?
I’m referring to an option strategy known as a covered call, which allows you to collect extra income from a conservative stock like Apple.
When I mention “options” to many investors, they instantly think of risky investments that are only for speculators.
Nothing could be further from the truth.
An option is simply a contract to buy or sell shares of a stock at an agreed-upon price (the strike price) at a future date. Options can be used to control large blocks of stock for a small price. But they also can be used to earn income or reduce risk. Best of all, options are traded as easily as any exchange-traded stock.
With a covered call strategy, you buy shares of a specific stock and then sell a call option on that same stock. By doing so, you agree to sell the position at a future date and price to another investor. In exchange for giving the other investor the right to purchase the shares at a future date and price, you earn a premium in the form of a one-time upfront payment – the extra income.
So how does a covered-call strategy work with Apple?
First, you need to own at least 100 shares of Apple. I say that because 100 shares of stock equal one option contract. Once you own the 100 shares, you’re ready to start generating extra income.
Now, let’s create the income-generating scenario: Apple trades at roughly $93.50 and has a dividend of 2.01%. By selling one covered call contract against 100 shares of Apple, you can earn an extra $100 every 45 days.
So every 45 days, you give yourself the potential to collect $100 against 100 shares of Apple. Annually that equates to roughly $800 of extra income. By implementing a covered-call strategy, you’ve taken a conservative long-term investment, Apple, and boosted your potential income $8 per share creating your own dividend yield of roughly 8.6%.
Are you interested in earning more income from Apple? Would you like to earn more from other safe, blue-chip dividend stocks that you already own? If so, I’d like to help you.
My latest issue of income-based High Yield Trader is out Wednesday, so here’s your chance to get all the details on how I produce safe, consistent income using Apple plus three to four additional stocks. It’s a risk-free trial so what do you have to lose?