Income Investors Will Look Very Smart With These Gains

Call it the “Summer of Pain.” All the major indexes are down for the year, flirting with textbook “correction territory.”

Utility stocks, as tracked by the Utilities SPDR ETF (NYSE Arca: XLU), have been among the hardest hit. The XLU ETF is now off an eye-watering 20% from its February 2015 highs.

The trouble is, the utility sector is a massive favorite among income investors, thanks to its stability and generous yields. XLU, for instance, pays close to 4%.

But even that attractive yield won’t come close to paring down the losses this sector has suffered recently.

And that has a lot of investors – particularly conservative income investors – nervous.

But… utilities aren’t going out of business anytime soon, and that 4% yield still beats the broader markets.

And the simple play I’m about to show you will make sure you get paid all year while taking the bite out of some of the downside risk.

Dates to Know for This Strategy

As I mentioned, it’s the attractive dividend yields that, at the best of times, make utilities and XLU so popular with investors.

It’s easy to see why: You don’t have to worry about timing the markets. You just need to pay attention to some key dates and collect clockwork profits.

There are four important dates to watch out for:

The Declaration Date is when the dividend payment is announced by the company.

The Ex-Dividend Date is when you must own the stock in order to receive payout.

The Record Date shows an accounting of all shareholders on record to receive a payable dividend.

The Payable Date is the big day, when the dividend is paid out to shareholders.

As a long-term income strategy, this is tough to beat. But, as we’ve seen with XLU, the problem is that stocks are dropping faster than a year’s worth of dividends can cover.

Now, there are two ways to deal with this problem.