In the Daily, we frequently talk about asymmetric investing opportunities like crypto.

These are ideas that can turn tiny grubstakes into life-changing gains… like turning $500 into $50,000 or even $500,000.

But our core strategy is to have multiple streams of safe income.

You can then use a portion of that safe income to make asymmetric bets without putting your current lifestyle at risk.

And the best thing is, even if your asymmetric bets don’t pan out, your safe income replenishes every year.

Below are five steps to choose Dividend Elite stocks. These are the best ways to allow your portfolio to grow safely and use the extra income to take advantage of asymmetric bets…

Five Steps to Choosing Dividend-Paying Stocks

Dividend Elite stocks are, first and foremost, companies that aggressively grow their dividends year after year. But a few other criteria set them apart…

  • Dividend Elites are usually small- or mid-cap stocks.

Smaller-sized companies have more potential for growth than larger-sized companies. Think about it this way: Blue-chip stocks are the giant, seasoned oak trees that grow 7% per year. Small-cap stocks are the young oak trees that grow 15% per year.

These stocks also see less interference from big institutional investors. Small- and mid-cap stocks are often too small for the billions that huge funds have to invest, and that makes them cheaper for investors like us.

  • Aggressive dividend growth.

Just like the blue-chip stocks, Dividend Elite stocks raise their dividends often and by large amounts.

And companies that raise their dividends outperform the market – and other types of stocks – over the long haul.

  • A safe payout ratio.

If you’re buying a stock for dividend growth, you need to make sure there’s actually room for the dividend to continue growing. One way of doing this is by calculating what’s called the “payout ratio.”

To calculate a payout ratio, divide a company’s dividends per share by its earnings per share. The lower the payout ratio, the more room a company has to increase its dividend.

Dividend Elites have small- to average-sized payout ratios – typically less than 70%. This leaves room for dividend growth to continue for many quarters.

  • Low debt levels.

Raising dividends is fantastic – but not if it comes at the expense of safety. Dividend Elites are companies with no debt or low/manageable debt levels.

Just as in your personal finances, too much debt in a company is dangerous. If the marketplace suffers a downturn, or the business venture that needed the debt funding flops, the company is in a bad spot.

That means investors are unlikely to get a dividend… let alone an increasing dividend… from companies carrying a lot of debt.

  • Discounted valuations.

Investing in Dividend Elites offers market-beating returns for a fraction of the cost. Plus, you’ll have an additional safe income stream in the form of dividends.

When you have Dividend Elites working for your portfolio, you have the security to use the income they provide to make asymmetric bets and boost your overall performance.

Palm Beach Research Group