I think that some context is needed in analyzing this quote. The entire quote reads as follows:
And here comes in the question whether it is better to be loved rather than feared, or feared rather than loved. It might perhaps be answered that we should wish to be both; but since love and fear can hardly exist together, if we must choose between them, it is far safer to be feared than loved.
In this, a couple of realities present themselves. The first is that Machiavelli forces a fundamental choice in being "feared" and "loved." The paradigm offered is that both are the ultimate ideal. Yet, he is writing about reality, and in a realistic state, ideals are almost impossible to achieve. With this in mind, the ruler must understand that conditions will be present in which a choice will probably have to be made. Additionally, Machiavelli argues that in its most basic form, both emotions negate the other. One cannot fear and love in the same proportion, with the same intensity, simultaneously. To this end, there is challenge present. Understanding that a choice has to be made, Machiavelli says that the ruler has to be feared above all in order to quell threats and dissension to their power and to ensure complete loyalty on the part of the subjects. It is here where Machiavelli is seen at his most practical in articulating how the game of politics is a business rooted in pragmatism.