Getting a basic income from the stock market

This time, we don’t talk about trading but investing. Specifically, we will look at strategies that earn income from various high-dividend stocks and see how they can ensure additional recurring income. 

Contemporary instruments, called high dividend stocks, are enjoying increasing popularity in relevant circles. Especially in recent years, more and more fund companies and asset managers have focused on the growing need for additional calculable income. What exactly are high dividend stocks, or what characterizes this security segment? Despite a wide and international variety of products, the product category essentially combines eight basic characteristics:

Listed on the Stock Exchange: All high-dividend stocks are listed securities. 

Legislation: numerous instruments in the high dividend securities area are subject to special legislation with their corresponding rights and obligations. 

Tax exemption: Due to special legislation, many high-dividend stocks are exempt from corporation tax at the company level. 

Requirements: Also, due to special legislation, many high-dividend stocks are subject to special obligations, such as a minimum payout rate.

Distribution Yield: The combination of tax and liability exemption is generally reflected in above-average dividend yields. 

Distribution frequency: In high dividend stocks, dividend payments are usually made several times a year, at least every six months, but typically quarterly or even monthly. 

Management Guidance: Many high-dividend stocks maintain a distribution guide that includes fixed upfront payments over one year. 

Target Group: High-dividend securities are often geared towards the needs of future or current pensioners, pension funds, and similar pension plans.

Here are some instruments as examples:

Business Development Company (BDC)

The BDC is a legally regulated form of publicly traded investment companies in the United States established in the 1980s to make venture capital investments more attractive to small investors. For this reason, BDCs are not taxed at the company level as long as they distribute at least 90% of the net income to their shareholders, who, in turn, must generate at least 90% of the dividends, interest, and profits. Deliveries are made quarterly.

Real Estate Investment Trust (REIT)

REITs are publicly traded companies active in developing, managing the real estate and the mortgage business. All are subject to their legislation, which ties the state to specific requirements, such as a minimum pay rate. In return, REITs are generally exempt from corporation tax at the company level. 

High yield debt

Traded debt (ETN) is a relatively new asset, issued in 2006. They represent a fixed base value. It can be considered an index but also a basket of different values, currencies, or commodities.