ConocoPhillips (NYSE:COP) leads the way on the negative side with a huge dividend cut. The company will pay $.25 a share on March 1, 2016. COP will be ex-dividend on February 11, 2016. Its previous dividend was $.73 per share.
For stocks like this, I had hoped to build shares through dividend reinvestment. A dividend cut is needed to preserve the safety of the principal invested in COP. I will continue to hold the stock, as I think it is too late to sell. I will also continue to reinvest the meager dividend.
Some attractive calls are available to boost your income and make up for the dividend cut. In this case, you need to select a strike price much higher than your basis, so make sure you do not have your COP called away and suffer a capital loss while you wait for the market to turn around. Keep your expiration dates as short as possible.
The table below illustrates a call available today that is risky when you look at the potential capital loss, but encouraging for income.
Challenging times for income investors. Do not panic. Work your portfolio with a bias toward income.