Objective: Generate annual dividend income of up to 9% +/-.  Stay invested 100% of the time by rotating into and out of securities as needed to help maintain a steady income.

Strategy At-a-Glance

Generate annual dividend income of up to 9%+/-. 

Stay invested 100% of the time in Bull markets

Stay in cash during Bear markets

Invest in high dividend paying CEF's, ETF's, and Stocks

How It Is Done
The methodology behind the DIS strategy is simple. We buy a holding before the dividend date, collect the dividend, then sell the holding when it gets back to our basis price.
To learn about this in more detail click here.
How do we minimize risk
In order to minimize downside risk in DIS, we are trying to hold these stocks for the least amount of time possible. We also diversify our holdings into multiple market segments.
Historically our drawdowns at any given time in this model has been between 2%-4%.
  1. DIS has the objective to capture dividends, where 90% of the gain in the portfolio is generated. Only a tiny amount of capital gains (share price grow in the underlying holding) comes from equity growth.

  2. DIS has the goal (not the promise) of generating double-digit returns, primarily from dividends and a small amount of income from covered call premium.

  3. To achieve the above objective, we buy higher-yielding equities (yields running from 4% to over 20%) on the historically lowest price day within 10 days of the equity's ex-div date (the date you must own shares in the holding in order to receive the dividend).

  4. On ex-div date, the dividend is locked in and we immediately put a sell order in at our basis plus a tiny fraction to get us out of a profitable trade.

  5. We know from our analysis of each equity that there is a high probability (80% or so) that the holding will move back above its basis within 10 days of its ex-div date.

  6. June is an end-of-quarter month. When the market is cooperative, as it was a week ago, we look to get 100% invested in high-yielding closed-end funds and other equities to collect the dividend and then as soon as possible, get out of those holdings with a net capital gain in the share-price of each holding.

  7. Here is an example:

  • We buy XYZ for $50 per share

  • Two days later, we lock in $0.50 per share on the ex-div date

  • On the ex-div date, the dividend is locked in and, as an example, the price per share drops to $49.00 per share.

  • On the ex-div date, we put a sell order in at $50.10. Historical analysis tells us that 80%+ of the time, the ticker will trade back above its basis (in this case $50) within 10 days following the ex-div date.

  • We sell the holding as soon as it hits $50.10 or more.

Why do we do this... High-yielding CEF's have horrible records for losing money; especially in down-trending markets. Risk is simply too high to hold onto these equities just for the dividend. Getting out of these holdings quickly does 2 things:

  • It takes risk of loss off the table by not holding the equity once it becomes profitable, and

  • It frees up capital to buy other high-yielding CEF's to run the income-harvesting strategy.

Click HERE to view details about Diversified Income Strategy