Income investing is an investment strategy you use if you need to receive a steady stream of income. When income investing is usually considered, what comes to the mind of most investors is investing in fixed-income securities such as bonds. However, in this post, we will strictly discuss how you can invest in stocks to provide a steady stream of income.

Dividend Payments

The main way stocks can provide a steady income for investors is through dividend payments.

The companies that are most likely to pay out dividends to their shareholders are those more established companies. Such companies may have grown to certain sizes and may no longer be able to sustain high growth rates by expanding into new markets or products. So, because of this, rather than reinvesting their earnings, they instead tend to pay them out in the form of higher dividends to their shareholders.

Dividend Yield

However, it must be noted that income investing is not just a matter of investing in companies that pay out very high dividends. Rather, the important factor is the size of the dividend yield. In this respect, the dividend yield measures the actual return a dividend provides a shareholder. The dividend yield is calculated by dividing the dividend per share by the price of the share (dividend per share / price of share).

Most income investors look for a dividend yield of 5 to 6 percent.

Past Dividend Policy

Another factor to consider when investing in stocks for income is the dividend policy of the company you are investing in. To do, this you should examine the company’s past record of paying out dividends. A company that suddenly increases its dividend payment over a short period will warrant further investigation. On the flip side, a company that has paid out large dividends over a long period of say 10 or more years is most likely to pay out similar dividends in the future.

Other Factors to Watch

It is also important to note that because a company pays out large a dividend, that does not necessarily mean that it is a financially sound company. Perhaps, it might have been better for the company to have retained and reinvested the income to counter future difficult times rather than pay them out as dividends.

Finally, you must be aware that in most countries, dividend payments are taxed at the same rate as the income you earn from your employment.

Table of Contents

1. Introduction
2. Fundamental Analysis
3. Qualitative Analysis
4. Value Investing
5. Growth Investing
6. GARP Investing
7. Income Investing
8. CANSLIM
9. Dogs of the Dow
10. Technical Analysis 1
11. Technical Analysis 2
12. Technical Analysis 3
13. Technical Analysis 4
14. Jim Cramer’s Strategies
15. Warren Buffet’s Strategies
16. Intrinsic Value