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There are several places investors can find income these days in the market. Attractive yields have lured investors into bonds this year, with the 10-year Treasury yield remaining above 4%. Americans have also flooded into cash-equivalent accounts like money market funds, which had a total $6.68 trillion in total assets as of the 6-day period ended Nov. 26, according to the Investment Company Institute . However, money market yields are expected to fall alongside Federal Reserve interest-rate cuts. For instance, the Crane 100 list of the 100 largest taxable money funds was once over 5% this year. As of Tuesday, it was 4.44%. In this environment, UBS favors diversified fixed-income strategies. Yet another way to bring in income is by buying dividend-paying equities, such as those with high yields and those that consistently grow their payouts, Mark Haefele, chief investment officer of UBS Global Wealth Management, said in UBS’ 2025 outlook. In fact, the MSCI World High Dividend Yield Index’s yield will likely surpass cash yields by the end of 2025, he wrote. “Considering high-dividend yielders that have a track record of consistently growing dividends can improve income sustainability,” Haefele said. Options strategies , such as put writing and covered-call writing, can also boost income potential, he noted. With a covered call strategy, investors buy a stock and then write call options against it. Investors hold onto the stock and potentially capture some capital appreciation. Once it hits the price of the call option investors wrote against it, the stock can get called away. A put is the right to sell a stock for a certain price within a specified time period. Investors collect income from writing the options contracts. “By harvesting volatility premia, such strategies can further diversify sources of portfolio income and may be treated as capital gains (rather than income) in some jurisdictions,” Haefele wrote. However, it is a combination of the three that may really pay off. “We estimate mixing high dividend, dividend growth, and option strategies could deliver a total yield of around 5-7% per year,” Haefele said. Putting the strategies to work Investors can trade individual options, or can invest in one of the many exchange traded funds that have popped up as the strategies have become more popular . The largest actively managed, covered-call ETF is the JPMorgan Equity Premium Income ETF (JEPI), which has a 8.03% 30-day yield and an adjusted expense ratio of 0.35%. Global X has a series of passively managed funds that track various indexes, such as the S & P 500 Covered Call ETF (XYLD). It has an annual distribution rate of 10.35% and a 0.6% total expense ratio. When it comes to finding high-yielding dividend stocks, it’s important to also look at company fundamentals, like whether they can cover the payouts. For instance, investor Jenny Harrington targets stocks with reasonably high dividend yield . The CEO of Gilman Hill Asset Management typically looks for stocks that may have gotten cheap and likes to see the potential for earnings growth. Jeremy Zirin, head of UBS Asset Management’s private client U.S. equity team, agrees that not every stock that pays a dividend is worth buying. He’s firmly in the consistent-dividend-growth camp with the fund he manages, UBS U.S. Dividend Ruler Fund (DVRUX). The fund focuses on companies with long-term track records of consistent dividend growth. It also looks for companies that pay a dividend yield at or above that of the S & P 500 . The broad market index currently yields 1.18%. “Research suggests that companies that consistently grow their dividends deliver better risk-adjusted returns than the highest yield stocks,” Zirin said in an interview with CNBC. DVRUX YTD mountain UBS US Dividend Ruler Fund year to date He defines consistent growth as a 10-year track record of at least 4% increases. Zirin also looks at company fundamentals, like whether the cash flows are strong enough to support the dividend, and how businesses prioritize the payout. In addition, the team has strong views on the broader markets and where the money is flowing, he said. One sector the fund has been overweight in is financials, which is relatively inexpensive in a sustained economic expansion, Zirin noted. The upcoming Republican administration and Congress should also usher in less onerous regulations, he added. Another attractive sector is technology, which dividend investors don’t often consider, he said. The fund finds stocks that fit its criteria, and they are also exposed to artificial intelligence or other secular growth opportunities that can provide upside. Here are the top holdings of the UBS U.S. Dividend Ruler Fund, as of Sept. 30. Its top holding, Microsoft , has delivered 19 consecutive years of dividend growth, Zirin noted. Over the last several years, it has boosted its dividend by 10%, he said. The stock currently yields less than 1% and is up about 16% year to date. Broadcom , which yields 1.26%, has grown its dividend for 15 consecutive years. Some of its top holdings in financials also have a strong track record, like JPMorgan with its 14 consecutive years of dividend growth, Zirin said. Retailer Home Depot has 15 consecutive years of dividend growth, he added. The former has a 2.04% dividend yield, while the latter yields 2.1%.
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