Collect Double-Digit Yields from CVX Stock?
Today, I’m going to show you how to earn more yield from Chevron Corporation (NYSE:CVX) stock.
Not an ordinary yield. Not the kind of payout you see posted on Yahoo! Finance. Not the kind of dull, single-digit yield everyone else is earning.
No. Today I’m going to show you how to earn safe, double-digit yields from Chevron stock! Thousands of ordinary folks are using this technique to boost their portfolio income. With this method, regular investors earning payouts of 10%…12%…even 15% from the stock market.
I dare say this will be the most interesting and exciting articles you will ever read on this subject.
If You Want Higher Yields, Read This
You probably don’t need to hear another rant about the plight of today’s income investor.
Yields are at record-lows. Bank deposits pay out next to nothing.
By some measures, interest rates are actually negative. According to the Wall Street Journal, the real yield on 10-year Treasury notes has fallen below zero, adjusted for inflation. With payouts so low, any wisp of inflation can wipe out your savings. (Source: “By One Measure, U.S. Rates Are Already Negative,” The Wall Street Journal, April 8, 2016.)
We need to try something different. For this reason, I’ve been showing readers a little-known trick to boost their income. I learned about this strategy during my time on a Bay Street market desk.
Each month, pro traders used this method to earn double-digit yields. Regular investors, though, can use this technique as well. And the best part is that you can get started today if you want to.
It’s called selling “covered calls.”
The strategy consists of selling somebody else the right to buy a stock you already own, at a set price, for a certain period. In exchange for this right, you receive a fee called a “premium.”
In the worst-case scenario, your shares soar far above the set price and the buyer of the option “calls”—read buys—your stock from you. Your investment is closed out for a handsome profit.
On the other hand, most call options are never exercised. In that case, you get to keep your stock, the option premium, and any dividends collected along the way.
Complicated? A little. The process is a little different from collecting an ordinary dividend.
The extra yield, though, is worth the hassle. Of course, there’s a bit of a learning curve, but once you wrap your ahead around the concept, the extra income can be quite lucrative.
A simple example shows this point quite well.
Today, you can buy Chevron stock for $95.00 per share. Let’s say you buy 100 shares. Your total investment is $9,500.
After buying this stock, you can sell someone the right to buy your shares from you for $100.00 per share in about two months’ time. You collect $134.00 for selling that right. This $134.00 payment represents an instant 1.4% yield on your investment.
What if CVX stock doesn’t rise to US$100.00 per share? In that case, you keep your 1.4% premium, your 100 shares, and any dividends earned along the way. Afterwards, you can then do pretty much the same trade all over again.
We’re making more than twice what ordinary shareholders earn. Repeat this trade six times per year, and you can make 8.4%. That’s on top of Chevron’s relatively safe 4.5% regular dividend.
Of course, there are some downsides. If CVX stock increases above $100.00, we won’t get to profit in the rally. Growth investors, who are looking for speculative capital gains, don’t like the idea of having their profits capped beyond that point.
This is a valid concern. Dividend investors, though, are usually focused on making more income. They’re less interested in trying to “shoot for the moon” with risky strategies.
Double-Digit Yields Are Available Right Now
Of course, this article is just meant to be a quick overview. Selling covered calls is a little bit more work than collecting ordinary dividends. There are more things to learn before you can sell call options successfully.
That said, many investors are using this technique to safely double and triple the income they earn from the stock market. Selling covered calls is definitely worth the extra hassle for income-starved investors.