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3 Ways to Boost Equity Income (Part 1)

A closer look at three approaches to boost income without loading up on the riskiest areas of the market.

Alex Bryan 29.08.2019

Many investors obsess over investment income, and it's easy to understand why. Retirements are lasting longer, and with longer life expectancies come higher medical costs and greater risk of outliving one's assets. While demands on savings have increased, so has the challenge of meeting them with investment income. Interest rates are lower now than they have been historically, as are dividend payout ratios.

It isn't necessary to live solely on investment income, but many still focus on it, driven by a desire to not dip into principal for fear that such withdrawals may not be sustainable. That intention is good, but the focus on yield is often misplaced. Yield doesn't tell the full story of any investment. Aggressively chasing it can lead to risky areas of the market. Here, I'll highlight three approaches to boost equity income without taking much greater risk than the market.

Dividend Income
One of the justifications often cited for dividend investing is that high-yielding dividend stocks have historically offered better returns than their stingier counterparts, as Exhibit 1 shows. This is partially because high dividend yields are usually accompanied by low valuations, and cheap assets have tended to outperform pricier ones.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

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About Author

Alex Bryan

Alex Bryan  Alex Bryan, CFA is the Director of Passive Fund Research with Morningstar.

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