Dogs Of The Dow & Instant Dividends

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.