Cato Corp., is a fashion specialty retailer which is listed in the Consumer Discretionary section of our High Dividend Stocks by Sector tables. They target value and fashion-oriented females, and operate over 1200 women’s fashion stores, primarily in the southeastern U.S. They just reported that same-store sales are up 5% year-to-date, and that June sales increased 1%.  In their last fiscal quarter, ending 5/01/10, their revenue rose 8.9%, and their net income jumped 44%.

This is a conservatively managed firm, with zero debt, and it fares well in our Industry Comparison Table:

	CATO	Apparel Industry
P/E	11.81	16.24
Price/Free Cash Flow	11.27	19.98
Price/Book	2.11	2.88
Debt/Equity	NO DEBT	28.47%
ROE (TTM)	18.09%	3.66%
ROI (TTM)	17.14%	2.26%
Dividend Yield	3.33%	1.81%

There are attractive covered calls and cash secured put options trades available for CATO.

These two covered call trades yield from 14.7% up to a potential 34.9% annualized:

(July 8. 22, 2010 closing price)	Dividends Pre-expiration	Expi-ration month/Call Strike Price	Call Bid Premium	Total Static Yield (Annualized)	Potential Assigned Yield (Ann’d)	Total Potential Yield (Ann’d)
$22.56	$.37	Jan.2011/$22.50	$2.25	21.7%	-.06%	21.01%
	$.37	Jan.2011/$25.00	$1.40	14.84%	20.2%	35.19%

For more conservative investors, there’s also an attractive put option trade, with a 22%-plus yield and a lower break-even price, listed in our Put Selling Table.

CATO pays an $.185/share quarterly dividend, with their next ex-dividend date coming approximately Sept. 10^th.  They have a 35% dividend payout ratio.

Disclosure: No shares held at this time

Disclaimer: This article is written for informational purposes only.

© 2010 DeMar Marketing. All rights reserved.

Tags: CATO, covered call, covered calls, dividend, dividend payout ratio, dividend stock, dividend yield, ex-dividend date, high dividend stocks, put option, put options, put selling

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