Tag Archives: stocks

One Beacon Insurance (OB) -A High Dividend Insurance Stock With Juicy Options Yields

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By Robert Hauver

One Beacon Insurance, (OB), is a recent addition to the Financials section of our High Dividend Stocks by Sector tables.

This Bermuda-based, dividend paying stock traces its roots all the way back to 1831, as the Potomac Fire Insurance Co.

OB recently returned to profitability in Q4 2009, posting  earnings of  $.76/share, vs. a -$1.81/share loss in Q4 2008.

They also were quite profitable for full year 2009, with earnings of $3.60/share, vs. a -$3.99/share loss in 2008.

The company also had 31% growth in book value in 2009, and a slightly improved combined ratio of 94%.

(Combined ratio measures an insurance firm’s incurred losses and expenses, divided by its earned premiums, and doesn’t include investment income.)

OB is a company is transitioning into a Specialty insurance firm, having recently sold its Commercial Lines and Personal Lines businesses, a move they say will significantly lessen their catastrophe exposure, and add greater profits, in addition to freeing up significant capital.

Withstanding its higher debt load, One Beacon has many favorable metrics in our Industry Comparison Chart:

One Beacon (OB) Insurance Industry Peer Group
Dividend Yield 5.56% 2.57%
P/E 4.2 12.81
PEG .84 1.49
ROE 26.47% 7.95%
ROA 4.45% 3.41%
5-Year EPS Growth 17.58% 6.33%
Debt/Equity .43 .25

OB closed at $15.12 on Friday, and its current dividend yield is 5.56%.  Last week they declared a $.21 quarterly dividend,payable on March 31, to shareholders of record as of March 17th.  In addition to this attractive dividend, OB has some juicy call and put options, for investors interested in trading options, i.e., selling covered calls, or selling cash-secured put options:

Price March 5, 2010 Dividend Pre-Expiration Dividend Yield (Annual’d) August $15 Call Bid Price Call Yield (Annual’d) Total Static Yield (Annual’d) Total Assigned Yield  (Annual’d)
$15.12 $.42 6.0% $1.20 17.2% 23.2% 21.5%
Aug. $15 Put Bid Price Put Yield (Annual’d) Based on 100% Cash Reserve Breakeven
$15.12 $1.50 21.7% $13.62

The put option yield is over 3.5 times the dividend yield at present.

Disclosure: No positions yet.

Disclaimer: This article was written for informational purposes only.

Dividends vs. Puts – A Short Term Profit Strategy – Aug. 29, 2009

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By Robert Hauver

With the S&P 500 up over 50%, and the Dow up over 45% since March 9th, many investors are still on the sidelines, chewing on sour grapes, and still wondering if this incredible rally is going to last.

What can you do if you got left behind by the current rally, but still want to make a profit?

Click here to find out…

The Top 5 Dividend Stocks for 2009 – Part 3 – Buying Stocks At A Discount – May 20, 2009

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By Robert Hauver

In parts 1 & 2 of this series, we identified 2009′s top 5 dividend paying stocks, based on total cash payouts to investors. We also discussed a strategy that will protect your dividend yield against a market pullback.

In this article, we’ll discuss an option trading strategy through which you can buy a stock at a discount to its current price, or, at least earn a nice yield by trying to.

If you have your eye on some high dividend stocks, or you’ve put together a best stocks watch list, but the current prices are too high, you can often utilize selling put options to make sure you still profit from these stocks.

Click here… to continue reading.

The Top 5 Dividend Stocks for 2009 – Part 2 – Protecting Your Dividend Yield – May 15, 2009

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By Robert Hauver

In part 1 of this article, we identified 2009′s top 5 dividend paying stocks, based on total cash payouts to investors. We also posed the question, “What if you want the dividend income from these stocks, but you’re afraid of a market pullback, or, you think the prices are too high right now?”

1. Royal Dutch Shell (RDS-A, RDS-B) Pays $3.20/share, and currently yields 6.5%.

2. AT&T (T) – Pays $1.64/share, has a current dividend yield of 6.4%.

3. General Electric (GE) GE’s $.82/share 2009 payout currently equals a 6.1% yield. (The payout will decrease to $.10/share per quarter in the 3rd quarter of 2009, so the remaining payout/share for the balance of 2009 will be $.51, a yield of 3.8%, or 5.7% annualized).

4. Exxon Mobil (XOM) The company’s annual dividend rate is $1.60/ share, for a 2.46% current yield.

5. Chevron Corp. (CVX), has an annual dividend/share of $2.60, which equals a dividend yield of 3.8% at the current price.

There are 2 ways you can use options trading to protect yourself from a falling market. In strategy 1 you’ll still earn the dividend income, in addition to your option income. which can often multiply the dividend yield several times over.  In strategy 2, you’ll either end up owning the stock at a lower price and a higher yield, or you’ll earn a very attractive short term yield:

Strategy 1: Sell covered calls.

Strategy 2: Sell covered, (cash-secured), put options.

Click here… to continue reading.

The Top 5 Dividend Stocks for 2009- Part 1 – May 11, 2009

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By Robert Hauver

Standard & Poors recently reported that the “percentage of dividend income as personal income has steadily increased from 2.8% in 1988 to 6.7% in 2007”, a plus-200% gain. During this same period, interest income has shrunk from 15.03% of personal income to 10.41% in 2007.

Personal income from dividend stocks will continue to increase in importance, generating even greater demand for high dividend stocks in the coming years, fueled by the increased numbers of investors owning equities, and by the coming surge in boomer retirees.

Which are the top 5 dividend paying stocks, ranked by total cash paid to shareholders?

Click here… to continue reading.

“Dividends – How Safe Are They?” – May 4, 2009

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By Robert Hauver

Looking back at S&P 500 returns from 1926 – 2004, it’s estimated that dividends comprised 35% of total market price appreciation.  Pretty substantial right?

Wait, the case supporting dividends gets even stronger when you add in the impact of dividend reinvestment and compounding, which shows that dividends outstripped price appreciation by over 25 times.

Flash forward to 2009, and we here that Standard & Poors is predicting that this year will witness the biggest drop in dividends since 1942.  The market decline has created many accidentally high dividend stocks, as companies who’ve maintained their dividend payouts in spite of share price declines suddenly find themselves paying out a record dividend yield.

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“The Oracle of Omaha Speaks” – May 2, 2009

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By Robert Hauver

At this weekend’s Berkshire Hathaway meeting, Warren Buffet advised shareholders that he’ll be looking to acquire foreign companies, and/or stocks that generate a large portion of their earnings in non-U.S. currencies.  These could include foreign dividend paying stocks, or U.S. companies with a strong overseas presence.

He also said that Berkshire’s earnings were buoyed by the steady performance and dividends of their utility holdings.

Regulated utility companies, which we discuss in our report, “Drought Resistant Dividends”, (free with all subscriptions), are a dependable component for building a strong portfolio).

In this article we’ll examine the option trading strategy of selling covered put options as an alternative way to accumulate your favorite dividend stocks at a cheaper price.

Click here… to continue reading.

“To Buy or Not to Buy – That Is the Question…” – April 25, 2009

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By Robert Hauver

If hapless Hamlet couldn’t “decide in Denmark”, he’d really have trouble buying stocks in the current market!

As value investors, we often have to assume a contrary position, and go against the crowd, which can be very difficult for most people to do.

After hearing all of the negative news about the economy and falling earnings, it takes a lot of will power to grit your teeth and make a commitment to buy some high dividend stocks, (or any stocks), even though your research may show them to have a strong business model, and to be undervalued.

So, how can you increase your odds of buying dividend paying stocks at the right price, and capturing the best dividend yield?

There are many market metrics out there, but some of the ones that have proven useful in finding the best stocks to buy are:

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Using Put Options To Sneak Up On A Stock” – April 11, 2009

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By Robert Hauver

Selling put options is an option trading technique that we often utilize to “sneak up” on the best stocks on our watch list that we want to take a position in.

You may not realize it, but trading options, such as selling covered calls and puts, is a strategy that even many conservative investors use to augment their dividend stock income.

Have you ever found yourself in a position where you’d like to buy dividend paying stocks, but the current prices are just too expensive, and the dividend yield is too low to justify buying right now?

Instead of just buying this stock, take a look at selling puts against it. To illustrate this strategy, let’s look at the data for Kraft Foods, (KFT), which closed this week at $22.35.

To continue reading, click here…

Einstein, Dividends, and The Rule of 72 – 04/04/09

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By Robert Hauver

Even though Albert Einstein was famous throughout the world for his achievements in physics, such as his Theory of Relativity, the phenomenon he was most impressed by had to do with finance.

When asked what he considered to be the most powerful force in the universe, Einstein is reputed to have said, “compounding interest”. He went on to call this the “greatest invention in human history”.

Who are we to argue with a genius?

Compound interest provides a very powerful tool for amassing wealth in your portfolio, particularly when coupled with reinvesting dividends.

The Rule of 72 is why young people have such a great advantage when it comes to generating wealth, since they have time on their side.

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