Best way to make regular income from stocks — plus, how to use our trade alerts

Published Sun, Apr 28 202410:00 AM EDT

Here's our Club Mailbag email investingclubmailbag@cnbc.com — so you send your questions directly to Jim Cramer and his team of analysts. We can't offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries. This week, we're answering two questions. Question No. 1: What is the best, most efficient way to make a regular monthly income in stocks? — Chris Looking at ways to generate regular income from owning stocks is especially relevant given the temptation of a 5% risk-free yield from short-term Treasurys. Buying dividend-yielding stocks is the easiest and most straightforward way. These are shares of companies that provide a quarterly payout. The Club does not own any Treasurys but loves dividend stocks and strives to own them. Just this past week, portfolio name Alphabet became the latest Big Tech stock to initiate a dividend. Tracking the dividend yield on a stock is a way to look at the payout as a percentage like a bond yield. We don't "chase yield," meaning the dividend alone cannot be the only reason to buy a stock. A company can cut its dividend (or increase it). Bond yields stay the same for the duration of the bond. When looking for a dividend-yielding stock, studying the balance sheet is crucial. You must have confidence that sales and therefore earnings and cash flows are sustainable to support the continued payout. Higher is not always better. Sometimes really high dividend yields indicate that a stock is risky. Like bonds, the yield on a stock fluctuates inversely based on price moves. So, troubled stocks that keep their dividends as a way to entice investors to stick around until things get better would see their yields rise. Unlike bonds, whose coupon price stays the same, stocks can appreciate and investors get the dividend and the higher price. Stocks can also go down in price but at least you still get the dividend. If shares in a company are sinking and they cut or eliminate the dividend, that can often be a signal to consider selling. Question No. 2: Why does the Investment Club team keep making buy and sell recommendations during the premarket when Jim and the rest of the team have advised against trading during that time? — Tom Trade alerts go out in the premarket when the Club knows it wants to notify members to buy shares at the 9:30 a.m. ET opening bell on Wall Street. We always give members a 45-minute head start on all trades in hopes that you get the best price. (This policy is noted at the bottom of every Club story). Since we don't recommend premarket trading, that 45-minute lead time starts at 9:30 a.m. ET. So, the Club actually won't complete trades sent out as alerts in the premarket until 10:15 a.m. ET. Similarly, we won't issue trade alerts any later than 3:15 p.m. ET, so we can wait the 45 minutes until just before the market closes at 4 p.m. ET to book the trade. Sometimes, the Club is restricted from making a trade. That happens when Jim Cramer talks about a stock on a CNBC television show. We must wait 72 hours after the mention to issue a trade alert and then 45 minutes after to book it. But, in those cases, we advise members on actions we would have made if not restricted. A recent example is our Disney trim on April 15. We said on April 4 that we would sell some shares after Nelson Peltz lost his fight for Disney board seats. Since Disney was a hot stock and Jim was talking about it daily, the Club had to wait for our restrictions to lift. We finally made the trade on April 15 at $114.25 per share — lower than the nearly $120 price on April 4 when our story went out telling members to trim. (See here for a full list of the stocks INJim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

This week, we're answering two questions. Question No. 1: What is the best, most efficient way to make a regular monthly income in stocks? — Chris