But first, let’s review what Chloe said about what to look for in dividend stocks. “Don’t just look for the usual indicators of a good dividend stock, like a long dividend history: focus on factors that will attract more investors to the stock short-term. Those can include big dividend increases, earnings beats and of course a stock chart that’s moving up. “Companies whose earnings growth is expected to accelerate next year—meaning analysts expect earnings to grow even faster in 2018 than they did in 2017—are likely to attract more investors as 2018 passes, pushing their stock charts up.

Now let’s combine Chloe’s stock picks with a covered call strategy. Once considered a niche segment of the investing world, options trading has now gone mainstream. With little knowledge on the best strategies, you can use options to rig the odds in your favor and make trades that have up to an 80% probability of success. Find out how in this free report, How Options Work—and How to Hedge Portfolios with Options.

A covered call is a strategy in which the trader holds a long stock position and sells a call option on the same stock in an attempt to generate income. For every 100 shares of stock you own, you can sell one call. For example, if you own 500 shares of stock, you can sell five calls.

A covered call is a very conservative strategy that requires no margin. It’s a great way to create yield and lower your cost basis on your stock position. In my opinion, covered calls (also called buy-writes) should be a core strategy for all investors. At Cabot Options Trader and Cabot Options Trader Pro, we always hold a couple of covered call positions to give us slow and steady gains every month.

So how might we combine Chloe’s recommendations of American Express (AXP) and Microsoft (MSFT) as the best dividend stocks for 2018 with a covered call strategy, “Modest 2017 revenue growth of about 4% is expected to accelerate to 6% next year. And earnings growth is accelerating as well: analysts expect 4% EPS growth this year to improve to 11% growth next year.

The stock is reflecting that improvement: AXP has been in an uptrend since October 2016, and has so far advanced about 50%, bringing the stock to all-time highs. 400, which we collect. 400 from the call sold and the stock rising from 94 to 100. This would give us a yield of 11% in six months.

This is the ideal scenario. However, if AXP were to trade above 100 on April expiration, we would be taken out of our stock and call position by the trader who bought our call. Next, let’s take a look at Microsoft (MSFT). “As one of the oldest tech giants, Microsoft has a much stronger dividend history than many of its peers: the company has paid dividends since 2003 and increased its dividend in each of the past 13 years. Today, Microsoft’s dividend is nearly double what it was five years ago.

“And the company is still growing: analysts expect 9% sales growth this year and next. 1,084 per covered call if the stock closes at 100 or above on January expiration (January 19, 2019). This would be a yield of 11.53% in nine months. However, if MSFT were to trade above 100 on January expiration, we would be taken out of our stock and call position by the trader who bought our call.

If the stock is unchanged (still 96) on January expiration, the combination of the two dividends collected and the sold call will have created a yield of 7.12% in nine months. As you can see from the examples above, covered calls are a great way to create yield and reduce your breakeven on a position—and not just on Chloe’s best dividend stocks for 2018!

If you have never traded covered calls before, I recommend that you first choose a stock in which you own at least 100 shares and sell one call against it. So even if you own 1,000 shares of Facebook (FB), I recommend that you sell just one call to see how the strategy works. If you have any questions on how to execute this strategy, you can join Cabot Options Trader here to receive further guidance on your trading.