It’s tough right now to get returns above 1% a year right now without taking significant risks. For example ten year treasuries are running around 2% without much upside and a lot of downside. Stocks paying dividends of 2% or more are common, but they will track a general downturn. Typically quality high dividend stocks won’t decrease as much as other stocks in a downturn, but the losses can still be very significant. Individual stocks also carry company specific risks like lowering a guidance number, loss of a CEO or CFO, an analyst’s downgrade, etc.
High dividend paying stock ETFs are interesting because they offer relatively high yields (e.g., SDY, SPDR’s high dividend ETF is currently yielding around 3.5%) and have greatly reduced dependence on the ups and downs of individual companies. I sold S44 Jan 2012 puts in my IRA at $0.95 for SDY when it was trading around $51.50. If held to expiration this premium received would be the equivalent yield of around 1.85% per quarter. Since these were sold in my IRA, they required 100% cash reserve for the strike price value, or $4400 per put sold.
The risk of this approach is of course a market crash. It would take an additional 10% correction before the puts went in the money. If my puts were in-the-money at expiration I would probably let them be exercised and take the shares. At that price the effective yield of SDY would be around 4%
The bid / ask spread when I made the trade was quoted as as 0.8 / 1.10. I put in a limit order at .95—the midpoint price—and it sold after a couple of minutes.