Income investing adds to your portfolio

NEW YORK — Income investing — buying securities that pay out regularly — isn't just for retirees or the risk-averse. It's part of a diversified portfolio, along with bonds, and can bolster your returns.

If you're looking for a (fairly) steady paycheck from your investments, consider the following:

Preferred stock — issued by companies but different from common stock — tends to pay the highest dividends, in the 7 percent range, says Timothy McGeeney, vice president and senior portfolio manager for Meyer Capital Group in Marlton, N.J. But like any income-producing investment (think bonds), he warns, preferred stock is very sensitive to rising interest rates, which eat into your returns.

Real-estate investment trusts, or REITs, buy into a niche of the real-estate market, such as office buildings or mobile-home parks, then pass the rental income on to investors. Shares of REITs are traded just like stocks and often pay dividends of around 6 percent, although rising share prices in the past few years have reduced yields, McGeeney says.

Utilities and other dependable companies with steady income but little opportunity to grow often pay 3 to 5 percent of their price to shareholders annually. Big, established companies that can still treat investors to some capital appreciation — think Boeing or Procter & Gamble — might pay dividends of 2 percent or less.

McGeeney has some advice if you're looking to invest for income: not all dividends are alike.

The payments from most preferred stock and from REITs are taxed as regular income, while dividends from common stock qualify for the lower dividend tax rates (15 percent or 5 percent). And income-producing stocks aren't bonds. A bond returns your principal at maturity; with a stock there's no guarantee that you'll make your money back.

McGeeney suggests finding companies that steadily and reliably increase the amount they give back to shareholders and you'll enjoy income from your portfolio for years to come.