Monthly Archives: January 2010

Alexandria Real Estate (ARE)- 4 High Dividend & Option Yields

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By Robert Hauver

Alexandria Real Estate Equities REIT, (ARE), is the largest landlord for biotech firms in the U.S., which makes it a play on Healthcare.Although its common stock dividend is not very high, (currently a 2.26% dividend yield), there are 4 ways to achieve high single and double-digit yields from this stock:

1.With its juicy options, ARE is listed in our Covered Call tables, with a 14%-plus current yield on its July $65 calls, which are currently bid at $4.20. (ARE closed at $61.88 Friday).

The potential assigned yield for selling these covered calls 10.58% annualized, giving you a total potential yield of 27.19%.

2. Our Covered Put tables list $60 July covered puts at a $5.00 bid, for a 17.50 % annualized yield. (This yield is based on a 100% cash reserve.)

3. Alexandria has a preferred  stock,  AREEP, a cumulative convertible series D stock, that pays $1.75/share per year, in quarterly payments. AREEP is now at $21.75, and has a 7.97% yield. It’s callable in 2013 at $25.

4. Alexandria has another preferred stock, AREPC, a cumulative convertible series C stock, that pays $2.09/share per year, in quarterly payments. Note: This preferred stock is now callable at ANY TIME at $25/share, and it closed at $25 on Friday. This dividend yield is 8.36%.

Note: Many of the free finance sites have very sketchy info on preferred stocks. The online brokerage sites may provide better and more details.

Disclosure: Author long ARE preferred shares

Disclaimer: This article was written for informational purposes only.

Spectra Energy Partners LP, (SEP) -A High Profit Margin, High Dividend Energy Stock

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By Robert Hauver

Spectra Energy Partners LP, (SEP), is an oil & pipeline firm just listed in the Energy table section of our High Dividend Stocks by Sector Tables. SEP’s 79.99% profit margin is the second highest in the Oil & Gas Pipeline group.

SEP also outshines its peers in many other figures in our Industry Comparison table:

Spectra Energy Oil & Gas Pipeline Industry
Profit Margin 79.99% 15.29%
Debt/Equity .31 1.63
Return On Assets 7.48% 4.18%
Return On Equity 10.00% 7.91%
Return on Income 7.79% 5.18%
P/E 17.89 25.33
Price/Book 1.8 2.72

Spectra’s $1.60/unit annual dividend appears to be covered by $1.66 EPS, and in line with the 90% mandate for LP’s, with a dividend payout ratio of 91%.  SEP has steadily increased its quarterly dividends, from $.30/unit/quarter, to $.40/unit/quarter, since October 2007, and currently has a 5.39% dividend yield.

For investors who want to immediately increase their yield by trading options and selling covered calls, the June 2010 $30.00 call option, (SEPFF), has a current bid/ask of $1.15/$1.45, which is an additional 9.18% annualized yield on the bid price.  (The current Put option prices aren’t very attractive).

Disclosure: No positions yet.

Disclaimer: This article is written for information purposes only.

Astra Zeneca, (AZN)- A Low Debt, High Dividend Healthcare Stock

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By Robert Hauver

If you’re looking for a low debt healthcare stock with a high dividend yield within its peer group, Astra Zeneca, (AZN), is one of the best stocks to research first. AZN, which is listed in the Healthcare section of our High Dividend Stocks by Sector tables, closed Friday at $46.78, and pays $2.09/share in dividends, a 4.47% dividend yield.

AZN’s dividend payout ratio is a conservative 41.93%. Their debt-to-equity ratio is 58%, which is in line with the other top dividend paying stocks in the Major Drug Manufacturers group.

Their Price/Free Cash Flow is 11.35, the lowest among the high dividend stocks in this group.

Like many other stocks, AZN had a big run up in 2009, and is just 1.58% below its 52-week high.  More conservative investors may want to consider selling covered calls or selling cash-secured put options on AZN, for a quicker return.

The July 2010 $45.00 put is now bid at $2.85, a 12.2% annualized yield. Conversely, more bullish investors may wish to add to their $2.09/share semi-annual dividend income by selling the January 2011 $50 call options, currently bid at $2.35, for a total static yield of 9.49%. (The early 2009 ex-date was on Feb. 4th, so look for the 2010 ex-date to be somewhere around that period also).

Disclosure: No positions

Dogs Of The Dow & Instant Dividends

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By Robert Hauver

This year’s Dogs of the Dow are: Exxon, (XOM), Walmart, (WMT), (GE), and Procter & Gamble, (PG). Here are the 2009 Performance and current Dividend Yields for these 4 dividend paying stocks:

Ticker Price Performance (Year) Dividend Yield
PG $60.63 1.18% 2.90%
GE $15.13 -1.88% 2.64%
WMT $53.45 -2.59% 2.04%
XOM $68.19 -12.61% 2.46%

As you can see, these dividend yields, while respectable, aren’t that outstanding.

We’ve compared these dividend yields with Jan. 2011 puts on our Put vs. Dividend Comparison table:

Ticker Price Performance (Year) Dividend Yield Jan.2011 Put Yields Jan.2011 Put Strike Prices Breakeven
PG $60.63 1.18% 2.90% 10.25% $60.00 $53.85
GE $15.13 -1.88% 2.64% 13.80% $15.00 $12.93
WMT $53.45 -2.59% 2.04% 6.40% $50.00 $46.80
XOM $68.19 -12.61% 2.46% 8.23% $65.00 $59.65

In addition to achieving a much higher yield than the current dividends, selling put options gives you a lower breakeven price, cash within 3 days after making the trade, and defers your tax deadline on the trade until April 15, 2012. The downside: Your gains are taxed at your personal tax rate, and you won’t participate in any price appreciation, if there is one, but you will know what your return is now.