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.
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:
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:
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:
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.
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.