Monday, October 31, 2011
When friends and family ask me where to find a good income stock, it's tough to recommend anything besides my favorite utility company.
The stock is as safe as it gets. It pays a steady 5% dividend.
And if you're open to trying something new, you could as much as double your money over the next year...
Exelon operates the largest nuclear power fleet in the U.S. and the third-largest in the world. It powers more than 6 million homes in Illinois, New Jersey, and Pennsylvania.
Compared to others in the nuclear energy business, EXC is the most efficient. Its 17 nuclear reactors have run with the least number of down days among all nuclear producers in the U.S. This means EXC doesn't need to supplement its power production with other more expensive sources of fuel as much as its competitors do.
Further, its bottom line doesn't get hit when gas and oil prices start to go up. In fact, nuclear power becomes even more profitable.
Other energy companies that rely on oil, gas, or coal must get approval from local governments for rate increases to cover rising costs. If their rates go up, nuclear power generators can easily get the same rate increases, too – but without the corresponding increase in fuel costs. The nuclear companies keep chugging along with even higher operating margins, which means more money for investors.
When coal and gas prices popped to record highs in 2008, Exelon kept making money. When they plummeted a year later, Exelon kept making money.
That's why, when it comes to generating income from a retirement portfolio, Exelon is at the top of my list. And for folks willing to learn a new investment technique, it's possible to earn a much higher yield than 5% with Exelon... using stock options.
Stock options are one of the most misunderstood and misused financial vehicles on Earth. Your broker will tell you options are guaranteed to lead to financial ruin. But that's not true... You just need to know how to use them.
In my Retirement Trader letter, we use put and call options to boost the income we receive from some of the world's best companies. And you too can use this technique to set yourself up for a higher yield on your investments, starting immediately.
Here's how it works...
When you sell a put, you receive a "premium" in return for the promise that you'll buy a stock at a specific price (called a strike price). Selling a covered call is similar... You already own the stock, but by receiving the premium, you agree to sell the stock at a certain price.
Either way, the trade works out in your favor... as long as the stock is trading for more than the strike price on the day the option expires.
And that's exactly what I showed my readers how to do with Exelon. Last Friday, we closed out two positions on Exelon, making 13.4% on a put and 4.2% on a call in just two months. If we keep doing this trade over and over again, that would be an annualized return of over 108% for the put and 27% for the call.
It would be hard to make those kinds of gains simply holding the stock... especially with a well-established dividend-payer like Exelon.
Right now, we have a winning streak of 41 out of 41 using this simple and safe strategy. So when my friends and family ask me for ideas on generating income, I start with this.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Yesterday, Doc showed DailyWealth readers about "a conservative, high-income, retirement-friendly trading strategy" that can generate 15%-30% annual yields. Learn how to get started here: A Radical Approach to Generating Retirement Income.
Another one of Doc's favorite ideas is a group of stocks he calls "Digital Utilities." Like traditional utility stocks, these companies have near-monopoly positions and pay reliable, growing dividends. Read more here: How Digital Utilities Could Pay for Your Retirement.
Most stock market sectors are up more than 5% in 2011... financials (XLF) is the standout loser, down 12%.
Small caps are trying to break their downtrend... the Russell 2000 rebounds more than 20% over the past month.
Big silver fund SLV surges 17% in October.
Natural gas is building a new uptrend... jumps to its highest level in more than six weeks.