2 High Yield Covered Calls Trades

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Looking for quick income from your trading? There are 2 trades sitting near the top of our Covered Calls Table, which offer annualized yields of well over 25%. These aren’t high dividend paying stocks, but, rather, they’re dividend stocks with high options yields.

These 2 stocks couldn’t be more dissimilar. One is a U.S. homebuilder, and the other is a U.S.-based, multinational tech giant:

MDC Holdings (MDC): MDC’s homebuilding business activities include the purchase of finished lots or development of lots for the construction and sale of single-family detached homes to first-time and first-time move-up homebuyers under the Richmond American Homes name. The company’s financial services business activities comprise the origination of mortgage loans primarily for homebuyers; provision of third-party insurance products to homebuyers; and title agency services to homebuyers in Colorado, Florida, Maryland, Nevada, and Virginia. It also provides insurance coverage on homes sold and for work performed in completed subdivisions; and re-insures the claims. M.D.C. Holdings, Inc. was founded in 1972 and is based in Denver, Colorado.

Cisco Systems (CSCO): Cisco designs, manufactures, and sells Internet protocol (IP) based networking and other products related to the communications and information technology industries worldwide. It offers switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, access points, and servers, as well as function as aggregators on local-area networks and wide-area networks; and routers that interconnects public and private IP networks for mobile, data, voice, and video applications.

Dividends: MDC, which pays a $.25 quarterly dividend, paid out its first 3 2013 dividends in December 2012, to help its shareholders avoid higher dividend tax rates in 2013. Not to worry, however, since you can recapture this amount and more, via selling covered calls. (See below)

CSCO made a hefty raise to its quarterly dividend in late 2012, upping it by over 21%, to $.17, from $.14. CSCO also goes ex-dividend on 7/1/13.

Options: MDC currently has an out-of-the-money September $37.00 put which pays $2.65, which equals 7.25%, or 28.46% annualized for this approx. 3-month trade. If MDC moves to $37.00 or higher, your MDC shares will get assigned, resulting in an additional $.46/share gain, for a total potential annualized assigned yield of over 33%.

(You can see more details on this and over 35 other call option trades in our free Covered Calls Table.)

CSCO has a shorter call expiration, a July $25.00 call option, which pays $0.46, offering you a 27.57% annualized yield. This call is also above CSCO’s share price, so if CSCO rises to $25.00 or above, you’ll receive an additional $.18/share.

MDC-CSCO-CALLS

There are also attractive put options selling opportunities for MDC, which you can learn more about, in our free Cash Secured Puts Table.

Author: Robert Hauver, copyright 2013 DeMar Marketing, All Rights Reserved.
Disclosure: Author was short MDC put options, and long CSCO shares at the time of this writing.
Disclaimer: This article was written for informational purposes only. Author not responsible for any errors, omissions, or actions taken by third parties as a result of reading this article.

How To Sell Cash Secured Puts

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by Robert Hauver
There’s a low-profile, conservative trading technique that we often utilize to “get paid to wait”, for stocks that we want to take a position in.
Have you ever wanted to buy a stock, but its current price seems too high, or the market may have gotten ahead of itself? Instead of just buying this stock, consider selling put options for it.
As it turns out, the put option premiums that you can receive can often be higher than a stock’s next few dividends, even on high dividend stocks.
Here are some important principles and definitions to remember when selling options:
1. One option contract = 100 shares of the underlying stock.
2. The further out in time that you sell an option, the more money, (higher premium), you’ll get paid. Why? Because options have time value, i.e. “time is money”
3. Put option sellers don’t receive dividends. We list dividends in out our Cash Secured Puts Table so you can compare them to the put premiums.
4. Strike Price: The price you’re agreeing to buy the stock for, up until the expiration date, in return for being paid a Put Premium now.
5. Bid: The price that Put or Call buyers are willing to pay.
6. Ask: The price that Put or Call sellers are willing to sell at.
7. Many brokerage sites also list the Bid and Ask quantities, which is helpful – if there are many more bidders than sellers, you may have a chance of selling your put or call options at a higher price/premium than the current bid.
8. Volume/Open Interest: Volume is amount of contracts which have changed hands today. Open Interest is the amount of contracts which haven’t yet expired for each call or put option. Thinly traded options have lower Open Interest.
9. Cash Reserve: This equals the amount of $ that your broker will hold in your account, to ensure that you have enough funds to buy the underlying shares. This amount varies from approx. 25% up to 100%, depending on the type of account- IRA’s will need a 100% cash reserve, whereas taxable accounts approved for Option Level 3 may have only 25-35% held as cash reserve per put selling trade.

TRADING EXAMPLE: To illustrate how to sell cash secured puts, let’s look at MDC, which has high options yields, and was trading at $38.91 at the time of this writing.
1. Go to the option chain for MDC, and select/find “Puts”. (Many brokers’ sites let you select puts OR calls, which makes the data less confusing.)
For each option you’ll see the Strike Price, the Last or most recent price, the Bid prices and quantities, the Ask prices and quantities, today’s Volume, and the current Open Interest (OI).
2. Look up the values for the closest months, (there’s usually a pulldown menu), to see if there are any good yields on Put strike prices below MDC’s current price. Even though there are June and July expirations, we chose the September expiration, further out in time, since it gives you a bigger put premium, (payout), which, in turn, lowers your breakeven.
MDC-PUT-5-28-2013

3. Compare the Bids for the Strike Prices that are below the stock’s price. If you want to be more conservative, choose a lower strike price, for a lower breakeven. If you want to be more aggressive, choose a high strike price, which will pay you more, but give you a higher breakeven.

4. Compare the breakevens to the stock’s 52-week low and high, to give you an idea of its range. You can find this data on the far right side of our Cash Secured Puts Table.
MDC-PutTable
5. We chose the September $38.00 put in our example. It pays $2.70, which gives you a $35.30 breakeven. Since the Bid Quantity (BidQ) is 204, and Ask Quantity (AskQ) is only 21, there’s a good chance that you may be able to sell the $28.00 put for more than $2.70.

6. Compare the upcoming dividends between now and the expiration date: Is the put bid price higher than these dividends? In some cases, it’s much higher. In our example, the Put Bid Premium is nearly 10 times MDC’s next dividend payout.

7. Look at the Put Options Yield: Our table lists all put yields as annualized because there are many different expiration dates. In this example, the Sept. $38.00 put option pays $2.70, which is a 7.1% nominal yield, for a 116-day term, which equals 22.95% annualized.

8. Cash Reserve: For each contract that you sell, your broker will reserve/hold in your account the $ needed to buy 100 shares of the underlying stock. In our example, we sold one $38.00 put, which equals $3,800.00 Cash Reserve (100 x $38.00 MDC share price).

9. Placing the Trade: Click the “Trade” link for the put option you want to sell. This should take you to a Trading module.
>1. Choose “Sell to Open” in the Action pulldown menu.
>2. Choose “Limit” in the Order Type menu.
>3. Enter your desired Selling Price in the Limit Price field.
>4. Select “Day” in the TIF pulldown menu
MDC-STO
When you’ve made all of these entries, click the “Verify Order” button. This will bring up a summary of your order which will list the Expiration Date, the Put Strike Price, and your selling price.

Yikes! What have I gotten myself into?! In our example, we sold one September 2013 $38.00 put for MDC, which obligates us to buy 100 shares of MDC at $38.00, up until this put option’s Sept. 21, 2013 expiration date. BUT, our real cost is only $35.30, because we got paid $2.70/share, ($270.00/contract sold), for selling the put option.

After selling 1 put, you’ll receive $270.00 into your account (upon settlement in 3 days or less) for the contract you sold: (1 put corresponds to 100 shares of stock, 100 x $2.70 put premium = $270.00).

You’d have 1 of 2 outcomes at or near the expiration in September (usually options aren’t exercised or assigned until right around their expiration date):

1. Assignment: If MDC declines below $38.00, you’d be assigned (sold) 100 shares of MDC for every put contract you sold.
2. Non-Assignment: If MDC doesn’t decline to approximately $38.00 or less, your cash reserve money gets released, and you’ve made $270.00 for every contract you sold, less commissions.

In scenario 1, you’d end up owning MDC at a cost basis of $35.30, which is 10.23% lower than its current $38.91 price. There are two ways to view this outcome: Some traders would say that if you’d just waited and done nothing, you would have been able to buy it for $35.30 or even less, anyway, if the market went down.
However, you wouldn’t have had the profit opportunity that selling the put gave you, had you just waited for a market downturn. In addition, you received the put cash immediately, which you can put to use now, AND you’ve determined your potential buy price at $35.30.

Timing: Since selling puts is a conservative bullish strategy, it’s best to sell them after prices have fallen, since put prices move inversely to the market. Look for a “down” day or week when the stock is falling in price – this downward action will inflate the put premiums you can sell for, and lower your breakeven.

Need more info? You can also find more definitions in our Options Glossary page.

Author – Robert Hauver, copyright 2013 DeMar Marketing, All Rights Reserved.
Disclosure: Author was short MDC put options at the time of this writing.
Disclaimer: This article was written for informational purposes only. Author not responsible for any errors, omissions, or actions taken by third parties as a result of reading this article.

An Undervalued High Dividend Stock With Lucrative Cash Secured Puts

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by Robert Hauver
We first wrote an earlier article about Northern Tier Energy LP, (NTI), back in early April, when the big question was whether or not this MLP would continue to pay its huge quarterly dividend. This older article also details NTI’s business model, which we like.
In February, NTI paid out a $1.27 dividend, which equated to an 18.55% forward dividend yield, making it one of the highest yielding dividend paying stocks in the market, and putting at the top of the Energy table in our High Dividend Stocks By Sector Tables.
Well, we’re happy to report that, thanks to a big blowout quarter, in which NTI reported an adjusted net income of $108.2 million, that was 20 times its Q1 2012 adjusted net income, NTI is keeping the faith, with another huge distribution, which goes ex-dividend on May 21,2013:
NTI-DIV-MAY
“The Board of Directors of Northern Tier Energy GP LLC, the general partner of Northern Tier Energy LP, has approved a first quarter distribution of $1.23 per unit that will be paid in cash on May 30, 2013 to common unit holders of record as of the close of business on May 23, 2013.” Cash available for distribution totaled $113.2 million for the first quarter 2013.” (Source: NTI website)

This continuing huge dividend payout raises the same question it did in the 1st quarter of 2013: Will NTI keep making these big quarterly distributions, or will it trim its payouts in the next few quarters?
Fortunately, NTI also has high options yields, which give you some alternatives. We currently have a very attractive September $25.00 put listed for NTI in our Cash Secured Puts Table. This put will pay you $2.60 now, and expires in roughly 4 months, which gives you a 30%-plus annualized yield.
To put this into perspective, even if NTI matches its current $1.23/unit May payout in the next quarterly payout, in August, you’d receive $2.46 in distributions, (possibly), vs. $2.60, for sure, right now, by selling the September $25.00 put. The other benefit of this trade is that it gives you a $22.40 breakeven, which is 16% below NTI’s current price/share.
NTI-PUT-MAY
The traditional, simpler approach is to buy NTI outright, and hold onto the shares long-term, using the dividend stream for income, and to ride out the potential ups and downs of NTI’s future share price and distributions.
We’ve adopted a combo of 2 strategies for NTI, since we believe in its business model: 1. Buy and hold for income and potential price appreciation 2. Sell cash secured puts, in order to gain additional income, and lower our ultimate breakeven cost.

NTI also has Covered Calls, which we list in our Covered Calls Table, where you can also see details on over 30 other covered calls trades.
However, the problem with adopting a short-term Covered Call trade for NTI is the uncertainty surrounding its next quarterly distribution – will it be $1.23 again, or will they cut the next distribution?
The biggest short term obstacle in NTI’s path is that they’ll be doing a scheduled shutdown of their refinery in the 2nd quarter for about 25 days. But there’s a silver lining- they’re doing the shutdown in order to expand their refining capacity. Yes, the 2nd quarter will show lower earnings, BUT, long term, the shutdown is a positive for NTI and its shareholders, due to the expanded capacity.
Institutional investors also believe in NTI’s future growth, as do analysts, who are projecting big EPS growth for 2013 and 2014, making NTI look undervalued on a PEG basis:
NTI-PEG-MAY
NTI-PERF-MAY
Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author was long NTI shares and short NTI put options at the time of this writing.

How To Grab A Fast Double-Digit Yield From This Dow Dividend Stock

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by Robert Hauver
Dow dividend stock IBM, (IBM), is going ex-dividend next week, on 5/8/13:
IBM-DIV
IBM dipped below $200.00 again today, 5/1/13, which sets up a high yield, short-term covered call trade:
IBM-CALL

There are 3 potential income scenarios to this 2-week trade, all of which pay you at least a $2.08/share call option premium:
1. Static – IBM’s share price isn’t above $200.00 at or near expiration, and your IBM shares don’t get assigned/sold. You receive the $2.08 call premium and the $.95 dividend.
2. Assigned before the ex-dividend date- IBM’s share price is above $200.00 before 5/8/13, and your IBM shares get assigned/sold. You receive the $2.08 call option premium, and the price gain of $.37, but not the $.95/share dividend.
3. Assigned after the ex-dividend date- IBM is above $200.00 after 5/8/13, and your IBM shares get assigned/sold on or near the 5/17/13 expiration date. You’d receive the $2.08 call option premium, the $.95/share dividend, and the price gain of $.37:
IBM-CALLINC
You can see more details for this and over 35 other high yield options trades in our free Covered Calls Table.

Cash Secured Puts: We also list a short term put-selling trade for IBM which offers a 13.5% annualized yield, in our free Cash Secured Puts Table.

Earnings: IBM got beaten up after its most recent quarterly earnings report disappointed – revenue fell 5%, and diluted normalized EPS fell 7.2%. However, the 15% earnings estimates for 2013 are still strong enough to give it an undervalued 2013 PEG ratio:
IBM-PEG
Financials: Although it has more debt, IBM’s Mgt. Efficiency ratios are very superior to its peer industry’s averages. This cash cow also has an Interest Coverage ratio of over 35., and also has a 5-year Dividend Growth Rate of over 17%.
IBM-ROE
Other Valuations: Like many Dow dividend stocks, IBM commands a premium Price/Book value vs.its peers:
IBM-MKTCAP
Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author was short IBM put options at the time of this writing.

These 2 High Dividend Stocks Go Ex-Dividend Next Week

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by Robert Hauver

There are 2 dividend stocks from our High Dividend Stocks By Sector Tables, which go ex-dividend on 5/1/13: Calumet Specialty Products Partners, LP, (CLMT), and PAA Natural Gas Storage, (PAA).

CLMT is a refiner and processor of specialty hydrocarbon products, and operates six plants including operations in Northwest Louisiana, Pennsylvania, Texas and Illinois.

PAA’s business consists of the acquisition, development, operation and commercial management of natural gas storage facilities. Although PAA is listed as a Gas Utility stock on financial websites, it’s actually more of an Energy-related stock.

PAA owns and operates 3 natural gas storage facilities located in Louisiana, Mississippi and Michigan. PAA’s customers include electric utilities, local distribution companies, pipelines, natural gas producers, LNG importers, aggregators, marketers, and industrial and commercial end use customers.
CLMT-PNG-MKTCAP
Valuations: Both of these stocks are closer to the low end of their 5-year P/E range – (PNG went public in 2010, so there’s less history for it than for CLMT.)
CLMT-PNG-PE
Dividends: CLMT has a very impressive 51% dividend growth rate over the past 5 years, having raised its quarterly distributions from $.45 in 2008-2009, up to the current new $.68 payout. In fact, CLMT’s frequency of rate hikes has also increased – they raised their distributions 3 times in 2011, and 4 times in 2012, and just raised it again in the 1st quarter of 2013, to $.68 from $.65. After its 2010 IPO, PNG raised its distribution from $.21 to $.34, and then from $.35 to $.36 in 2011, where it remains currently:
CLMT-PNG-DIV
Performance: Both stocks have had a strong run over the past year, especially CLMT.
CLMT-PNG-PERF
Options: Although both stocks have options available, at present CLMT’s are much more compelling, particularly its cash secured puts. This strategy would make sense in light of the 93% price gains CLMT has had. This put trade offers you a 15%-plus annualized yield, and a breakeven that’s 11.55% below CLMT’s share price.
CLMT-PUT
You can see more details on this and over 35 other high options yields trades in our free Cash Secured Puts Table.

If you’re also interested in selling Covered Calls, we maintain a free Covered Calls Table, which also has over 35 high yield trades.

Financials: Except for its heavier debt load, CLMT’s ratios look stronger vs. its industry than PNG’s do. CLMT has an Interest Coverage ratio of 1.64. PNG has a much higher Operating Margin than its peers, and most of its ratios are in line with its industry’s averages:
CLMT-PNG-ROE
Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author had no positions in CLMT or PNG at the time of this writing.

Can This High Dividend Stock Maintain Its 18% Dividend Yield?

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by Robert Hauver

Looking for high dividend stocks? Our search for interesting dividend stocks has uncovered a refining/retailing/pipeline stock with one of the highest dividend yields in the market: Northern Tier Energy, (NTI), is a combination refining/retailing company, based in St. Paul, Minnesota, near the booming Bakken shale play in the Midwest.

NTI’s ability to source Bakken light sweet crude and Western Canadian heavy crude, gives it a big advantage as a refiner, since both of these sources are cheaper than West Texas Intermediate crude. NTI owns one of only two refineries in Minnesota and one of four refineries in the Upper Great Plains area within the PADD II region.

In addition to refining, NTI also has a ready sales outlet for its refined products, as it owns 166 convenience stores under the SuperAmerica brand and also supports 68 franchised convenience stores, mainly in Wisconsin and Minnesota. NTI also owns various storage and transportation assets, including a light products terminal, a heavy products terminal, storage tanks, rail loading/unloading facilities and a Mississippi river dock.

The refining business also includes a 17% interest in the Minnesota Pipe Line Company, which owns and operates the Minnesota Pipeline, a 455,000 bpd crude oil pipeline system that transports crude oil (primarily from Western Canada and North Dakota) for approximately 300 miles from the Enbridge pipeline hub at Clearbrook, Minnesota to the refinery. The Minnesota Pipeline has historically transported the majority of the crude oil used and processed in the refinery. (Source: NTI website)

Dividends: Since its IPO in July 2012, NTI has paid 2 distributions: $1.48 on 11/29/12, and $1.27 on 2/28/13. Projecting their most recent $1.27 distribution forward for 3 more quarters gives NTI a very high dividend yield of 18.55%!

NTI-DIV

Here’s the million $ question: Will NTI maintain this level of dividends? The following may offer a clue for the upcoming May distribution:

In the 1st quarter of 2013, the avg. retail gasoline price was $3.55, better than 4th quarter 2012. If you use 37% as a projected ratio of distribution paid to avg. retail gasoline price, this would indicate a potential May payout of $1.31. Of course, this is a very rough estimate, and it could be derailed by other factors – NTI’s refining margins may have shrunk in the 1st quarter, or mgt. may decide to utilize more of its cash for infrastructure expansion investments. NTI stated in a recent investor presentation that it “plans to invest in logistics operations targeting trucking, terminal and pipeline assets.”

NTI-BARRELS

Given this uncertainty, and NTI’s big 88% rise since its IPO, what should you do?
Options: Here’s what we did, (so far). We sold puts below NTI’s share price, to lower our breakeven, in case the stock price falls, if NTI cuts its May distribution. This trade projects the same quarterly distribution of $1.27 in May and August. Coincidentally, the Sept. 2013 $25.00 put pays $2.50, which nearly matches this projected payout. (Note: put sellers don’t receive dividends.) You can find more details on this and over 30 other put trades in our free Cash Secured Puts Table.

NTI-PUT

Covered Calls: Alternatively, you could buy NTI and sell covered calls to hedge your bet. This would pay you less option $ up front, but allow you to participate in future distributions and potential price gains.
This trade, from our Covered Calls Table, offers a $1.60 call premium, plus the potential for $2.61 in price gains, ($30 call strike minus $27.39 share price). You’ll also receive NTI’s next distributions, unless NTI rises above $30 before the ex-dividend dates, and your shares get assigned/sold. NTI should announce its next distribution sometime around May 13th.
NTI-CALL

Earnings: NTI looks very undervalued on a 2013 PEG basis, but analysts are projecting much less growth for 2014. However, given its ability to pay very attractive distributions thus far in its short history, even if NTI just keeps its yield in the “double-digit realm”, its dividend yield should continue to attract investors, and support its share price in the future.
NTI-PEG
Financials: NTI’s ratios look better than its peers so far. It does carry more debt, but it has sufficient Interest Coverage and a strong Current Ratio:
NTI-ROE
Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author was short NTI put options at the time of this writing.

3 High Dividend Stocks Going Ex-Dividend Next Week

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There are several dividend stocks going ex-dividend next week, (3/25/13 – 3/3/29/13) from the Financials section of our High Dividend Stocks By Sector Tables. The following 3 stocks are mortgage Real Estate Investment Trusts, or “mREITS”, as they are popularly known. They invest in mortgage-related securities, issued by government agencies, such as Fannie Mae and Freddie Mac, and use leverage to achieve high dividend yields.

Dividends: CMO increased its quarterly dividend to $.31, from $.30, while NLY and RSO maintained their dividend payouts this quarter. RSO maintained a $.25 quarterly dividend from late 2009 through 2011, but it dropped its quarterly payout to $.20 in 2012. Prior to the housing crisis, RSO paid as high as $.41. NLY dropped its dividend payout twice in 2012, to $.55, and then to $.50, before seemingly stabilizing at $.45 in Dec. 2012.

CMO-NLY-EXDIV

As REIT’s, they must pay out at least 90% of their income, in exchange for paying no corporate income taxes, hence their high dividend yields. Even with the decrease in dividend payouts, these yields are still quite high:

CMO-NLY-DIVYD

Current Valuations: The smallest stock by Market Cap, RSO’s P/E is closest to the low end of its 5-year P/E range, but CMO is the cheapest on a Price/Book basis:

CMO-NLY-PB

Options: Although all 3 of these stocks have options, we don’t list them in our Covered Calls Table or our Cash Secured Puts Table, due to low options yields. However, there over 30 other high yield trades in each of those free tables, which are maintained daily.

Financials: All 3 firms have similar Returns On Equity. RSO carries the least debt, and lags in Return On Investment and Interest Coverage:

CMO-NLY-ROE

Performance/Ownership: RSO has outperformed CMO and NLY in 2013, and over the past 52 weeks, partly due to its higher support from institutional and inside buyers:

CMO-NLY-PERF

Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author owned CMO and NLY shares at the time of this writing.

 

2 Dividend Stocks With High Yielding Covered Calls

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by Robert Hauver

There are 2 dividend stocks in our Covered Calls Table, that currently have interesting high options yields on out of the money strike prices:

Calumet Specialty Products Partners LP, (CLMT), and Cummins, (CMI).

Dividends: Both of these stocks have ex-dividend dates in May, prior to their May options expiration date of May 17, 2013 market close. CLMT, with its nearly 7% dividend yield, is listed in the Energy section of our High Dividend Stocks By Sector Tables.

CLMT-DIV

Both stocks have covered call trades which expire on the May 17, 2013 market close, after their May ex-dividend dates. CMI’s May $120.00 call option outpays its May dividend by over 11 times:

CLMT-CMI-CALLS

Covered Call Profitability/Income Scenarios: Both stocks have covered call trades with strike prices far enough above their share prices, that you can still earn good income, even if the shares get assigned/sold away prior to the option expiration date. For example, the Potential Assigned Price Gain for CLMT is $1.37, ($40.00 strike price minus $38.63 share cost), vs. its $.65 May dividend:
CLMT-CMI-CALLPROFIT
Share Performance: Both stocks have had big price gains over the past year, and have institutional support. CLMT has outperformed the market substantially so far in 2013:
CLMT-CMI-BETA
Financials: Both stocks have financial ratios above their industry averages, excepting CLMT’s debt load, which is higher than the .13 industry average. CLMT has an Interest Coverage ratio of 1.64.
CLMT-ROE
Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author was short CMI puts at the time of this writing.

An Energy Dividend Stock WIth High Options Yields

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by Robert Hauver

Energy Services stock Halliburton, (HAL), has risen over 18% in 2013, and is up nearly 35% since the November 15th lows. This is in spite of the fact that HAL recently posted 4th quarter 2012 earnings that were 32% lower than 2011 4th quarter earnings.

HAL’s 2012 full year earnings fell in its biggest region, North America, but rose in its other regions:

HAL-REGION

What are investors seeing? Analysts are predicting nearly flat 2013 sales, BUT, they’re forecasting 2014 sales to rise substantially, up 32%, which gives HAL a very low .42 2014 PEG ratio:

HAL-PEG

Dividends: HAL is certainly not a high dividend stock - it has kept its quarterly dividend at just $.09 since 2007, and yields under 1%:

HAL-DIV

High Options Yields: However, you can still earn good income from HAL, via selling options. We’ve listed below a short term trade for HAL, from our free Covered Calls Table. This April $41.00 call option pays over 18 times HAL’s quarterly dividend amount:

HAL-CALL

With HAL being so near its 52-week high, you may want to consider a more defensive way of trading it. Like selling covered call options, selling cash secured puts gives you immediate income, and a lower break-even cost, if you sell them below or close to the stock’s share price.

HAL-BETA

You can find more details on this and over 30 other put trades in our free Cash Secured Puts Table. The put income for this April trade is higher than the call income, and this put also pays much more than HAL’s quarterly dividend. (Note: Put sellers don’t receive dividends – we only list them on our tables for comparison.)

HAL-PUT

Financials: Although it has a lower Operating Margin, HAL’s Mgt. efficiency and Debt ratios are better than its industry’s averages.

HAL-ROE

Disclosure: The author held no Halliburton shares at the time of this writing.

Disclaimer: This article was written for informational purposes only and isn’t intended as investment advice.

A Tech Dividend Stock With Undervalued Growth

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by Robert Hauver

Looking for Tech dividend stocks with growth in 2013? Many investors have taken note of the fact that the Tech sector grew its dividends fastest of any sector in 2012. Couple this with the potential for earnings growth in this sector, and it makes for a compelling dividend hunt.

We found a Tech stock which not only pays a regular dividend, but also recently paid a special dividend, and has a low PEG ratio for its upcoming fiscal year.

Founded in 1982, Maryland-based Tessco, (TESS), services organizations responsible for building, using and maintaining wireless broadband systems. It offers many different product lines, including base station infrastructure, installation test/maintenance, network systems, and mobile devices/accessories.

TESS is a micro-cap stock, with a $195 million market cap, and is listed in the Tech section of our High Dividend Stocks By Sector Tables, after the firm’s special dividend doubled its dividend yield.

Earnings: Tessco’s fiscal year typically ends at the end of March, so, even though the chart below shows much better growth in 2014 than 2013, Tessco’s 2014 fiscal year will begin soon, in April 2013:

TESS also had good growth in its most recent quarter, and a low .75 5-year PEG ratio. Using the 15% 5-year growth figure and a risk-adjusted discount rate of 10.89%, gives a $39.27 estimated value for TESS, which closed this week at $24.24:

Dividends: TESS did the right thing by its shareholders, by declaring a special dividend of $.75, when nobody knew what US dividend tax policy would be in 2013. With its low debt load, the company had the cash to do this. TESS has paid dividends since 2009, and has nearly tripled its quarterly payouts since then, going from $.0667, to the current $.18/quarter.

Unfortunately, TESS isn’t listed in our Covered Calls Table, or our Cash Secured Puts Table, as there are no options available for it at present.

Financials: Although TESS works on slimmer margins, this should be improving soon, as it is transitioning from a low margin business with a major Tier 1 carrier, to more profitable business elsewhere. Its management efficiency ratios and debt load look favorable vs. its industry’s averages:

Performance/Technical Data: TESS had quite a run in 2012, and is also up 8.7% for the first 3 trading days of 2013. This stock should be a good one to add to your watch list, and buy on the dips that will most likely happen when our pals in DC start doing the debt ceiling tango in a few weeks.

Disclosure: The author was  long TESS shares at the time of this writing.

Disclaimer: This article was written for informational purposes only and isn’t intended as investment advice.