The Income Builder strategy is designed for investors who want a steady and generous income while still benefiting from stock growth. It focuses on well-established, dividend-paying companies and targets a portfolio yield of around 4%. This makes Income Builder ideal for those needing income to cover expenses without depleting their principal. While there are risks associated with higher-yielding stocks, this strategy also offers opportunities to diversify portfolios and benefit from market changes.

Income-Focused Investors

For investors who depend on consistent cash flow, the Income Builder strategy is a great option. This includes retirees, semi-retirees, or anyone looking to add to their income. By focusing on a higher current income, this strategy helps investors cover essential expenses like housing, healthcare, or daily living costs while still benefiting from the long-term growth of stocks. However, it’s important to note that the higher yields come with more risk, as companies offering high dividend yields often have more debt and are more sensitive to interest rates.

Contrarian and Opportunistic Investors

This strategy could be suitable for investors looking to benefit from temporary market dislocations. It focuses on buying well-established, dividend-paying companies currently out of favor and offering higher-than-normal dividend yields. The goal is to profit on mean reversion, where undervalued companies eventually recover as the market corrects its view or management makes changes. This approach provides potential for capital growth and a generous income stream for investors while waiting for recovery.

A Complement to a Growth-Focused Portfolio

Growth stocks are often more sensitive to market changes. While high-dividend yield stocks face their own unique risks, they are often less affected by market fluctuations like those in the S&P 500. When added to a growth-oriented portfolio, Income Builder can provide diversification in periods of market stress, bringing balance to the portfolios of growth-focused investors.

Why Choose This Strategy?

The Income Builder strategy is well-suited for investors across the spectrum. While focused on generating a reliable and robust income stream, there are other benefits that investors may find attractive. Income-focused individuals can rely on it for steady cash flow, while contrarian investors may see opportunities in undervalued stocks with recovery potential. Others may find it helpful as a source of diversification for a larger portfolio. Though it involves risk, it aims to provide a balanced approach to both income generation and potential capital appreciation.



This article was featured in the Spring 2025 edition of the Rising Dividend Report.

Read more articles from this issue here.