2 Dividend Aristocrats With Room To Run

by Robert Hauver
Looking for dividend stocks with a long term record of dividend increases? The S&P Dividend Aristocrats index contains 50 such stocks, all of which have increased their dividends paid per share yearly for the past consecutive 25 years.
This group contains many household names across various industries – some of the largest companies on the planet. Here are the top 15 companies, sorted by market cap. Healthcare giant Johnson & Jonson, (JNJ), tops the list, followed by Exxon Mobil, (XOM), after which the market cap drops to the mid-$200B range, with Procter & Gamble, (PG), Walmart, (WMT), and AT&T, (T):

The sector breakdown shows Consumer Staples as the leading weighted sector in the index by far, with a 26% weighting, followed by Industrials, with 17.4%, and Healthcare, with 13.4%: Click here to read more…

3 Healthcare High Dividend Stocks Beating The Market Pullback

by Robert Hauver
Looking for a safe place to hide during this latest market pullback? Healthcare was not only the leading sector in 2014- it has also led the market for most of 2015. Here’s a look at how the Healthcare sector has fared vs. the S&P 500, over the last 3 months, which just about coincides with the market highs of September 18, 2014. The Healthcare sector is up 3.81%, vs. a -1.44% loss for the S&P 500:
XLV-SP-12-17-14
Digging further, we found 2 high dividend stocks within the Healthcare sector, which have both outperformed this sector and the market – HCP Inc., (HCP), (a Dividend Aristocrat), and Sabra Healthcare REIT, Inc., (SBRA).

Here’s a chart of these 2 dividend paying stocks over the same 3-month period, vs. the S&P 500. HCP is up nearly 10%, and SBRA is up nearly 7% during this period, vs. a -1.44% loss for the S&P 500:
HCP-SBRA-CHART-2014-12-17

Dividends: Our High Dividend Stocks By Sector Tables, lists both of these stocks, in the Healthcare section. In addition, we also follow a third related high yield stock- Sabra’s preferred stock issue, SBRAP, which currently yields nearly 7%, and has also beaten the market during this same 3-month period, having risen 3.08%.
Although HCP has a low 5-year dividend growth rate of 2.94%, it has increased its dividend per share for 29 consecutive years.

SBRA has raised its quarterly dividend from $.32 in 2011, to the current $.39 payout. Sabra amply covers its SBRAP preferred dividends by a factor of 3.22, i.e. its net income is 3.22 times its preferred dividend payout.
HCP-SBRA-DIV
Preferred Long-Term Yield: The table below summarizes your net annualized yield for SBRAP, based upon 2 conditions:
1. You were to hold SBRAP until its 2018 liquidation date
2. Sabra redeems/buys back your SBRAP shares at the call date
Since SBRAP is trading at $1.08 above its $25.00 liquidation price, we subtracted this amount from the dividends that you’d collect between now and 3/21/18. You’d end up with a $4.71 net profit, which equals a 5.54% annualized yield:
SBRAP1-ANN-Yield
Click here to read more…

Disclaimer: This article was written for informational purposes only. Author not responsible for any errors or omissions.
Copyright: 2014 Demar Marketing All rights reserved

These 2 Dividend Aristocrats Have The Best Earnings Growth

By Robert Hauver

Are you searching for dividend paying stocks you can depend on?  The Dividend Aristocrats is an elite group of dividend stocks, created by Standard & Poors, whose members have increased their dividends for at least the last 25 consecutive years.  In fact, some of them have done so for many more years than that.  This group lost a few members during the economic downturn, so it’s quite a testament to the earnings power and management of those stocks that not only survived the crisis, but also managed to increase their dividend payouts during it.

We looked for stocks within this group who had consistent earnings growth, good mgt. metrics, and valuations that haven’t gone sky high, via the rally of the last few months, and we found these 2 impressive companies from 2 different sectors and industries, Nucor Steel, and VF Corp:

NUE-VFC-SECTOR

(We listed Company profiles at the bottom of this article.)

Earnings & Valuations: These are 2 of the very few Dividend Aristocrats stocks which achieved strong growth not only in their most recent fiscal year, but also impressive quarter-over-quarter earnings and sales growth, AND, have strong growth forecasts for their next fiscal year. NUE looks undervalued vs. its Steel & Iron industry peers, on a PEG, P/E, and Price/Sales basis, but is pricier on a Price/Book basis.

VFC’s earnings industry comps also look superior. Their projected Next Fiscal Year EPS growth is lower than the industry avg., since the industry is bouncing back from very poor growth in the most recent fiscal year and most recent quarter.  Having gained over 26% in the past 6 months, VFC’s share price gains have pushed its valuations higher as well, particularly Price/Sales:

NUE-VFC-PEG

Dividends: With its above-avg. dividend, NUE is listed in the Industrials section of our High Dividend Stocks By Sectors Tables.  Both of these stocks have upcoming March ex-dividend dates:

NUE-VFC-DIVS

Covered Calls: If you want to increase your yields over the short term, selling covered call options can offer you some lucrative additional income. In addition to often paying you fat premiums, selling options is a way to generate quick income from stocks that you own or wish to buy. Both of these 2 covered call trades feature high options yields, and have strike prices that are higher than their respective stocks’ current share prices. The higher strike price gives you the possibility of potential price gain profits, in addition to your dividend and call option income. If you’re more bullish about a stock, you may want to sell covered calls at a higher strike price – the difference between the strike price and the stock’s cost equals your potential price gain, or assigned yield.

These two 3-5 month trades have call options that outpay the dividends by up to 6 times.

(You can find more details for these and over 30 other trades in our Covered Calls Table.)

NUE-VFC-CALLS

Performance & Technical Data: Both NUE and VFC have been among the best stocks to buy for price gains over the past few months, but NUE is still down for the past year:

NUE-VFC-PERF

Cash Secured Puts: Since these stocks are near their 52-week highs, you may want to consider another strategy, selling cash secured puts, in order to achieve a lower break-even.  The VFC  $145 put option is below VFC’s current price, and gives you a break-even of approx. 6% below VFC’s price.  The put options pay out up to over 8 times more than the dividends do over this short term.

If you want to be even more conservative, and get a lower break-even price, you can sell cash secured put options at a strike price even further below the stock price, which won’t pay you as much of a put premium, unless you sell them further out in time. Generally, the further out in time you sell an option, the higher premium/payout you’ll receive.

(You can see more details on these and over 30 other high yield Cash Secured Puts trades in our Cash Secured Puts Table.)

NUE-VFC-PUTS

Financials:  Not much to complain about with these financial figures, excepting Nucor’s lower operating margin, which is probably due to them using scrap metal as their feedstock:

NUE-VFC-ROE

Company Profiles:

Nucor:: Established in 1940, Nucor is the largest steel producer in the US, and is the largest recycler of scrap steel in the world. Nucor produces many steel products, such as structural steel, sheet steel, plate steel, cold finished steel, and wire mesh, and also acts as a raw materials broker in the steel industry. (Source: Nucor Corp. website)

VF Corp: At $9 billion in sales, VF is the world’s largest apparel company. VF owns many famous apparel and footwear brands, such as Lee, Nautica, Wrangler, Eagle Creek, and others. VF’s lifestyle businesses – Outdoor & Action Sports, Sportswear and Contemporary Brands – are targeted to be more than 60% of total revenues by 2015. VFC is aiming to add $5 billion in organic revenue growth and $5 in earnings per share over the next five years from 2010 levels. Strong growth in our highly profitable international and direct-to-consumer businesses is expected to fuel an expansion in operating margins to 15%. Over the next five years, VFC’s goal is to grow its international revenues by 15% annually to comprise 40% of total revenues. VFC also expects 15% growth in its direct-to-consumer businesses, which should account for about 22% of revenues by 2015. (Source: VFC website)

Disclosure:  Author has no positions in NUE and VFC as of yet, but has definitely worn Wrangler and Lee jeans sometime in the distant past…

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

Author: Robert Hauver © 2012 Demar Marketing All Rights Reserved

3 High Dividend Stocks With Strong Growth And High Options Yields

By Robert Hauver

This week we’re focusing on 3 high dividend paying stocks, from 3 different industries, sectors, and countries – all of which have strong growth over the past year, past quarter, and also have good growth forecasts for their next fiscal year.  This diverse group contains a large cap, mid-cap, and a small cap, all of whom are listed in our High Dividend Stocks By Sector Tables:

BGS-CTEL-PROFILES

(All Company Profiles are listed at the bottom of this article)

Growth & Valuations: All 3 firms had robust earnings growth in their most recent fiscal years, and quarters. Next fiscal year growth is also projected to be good. CTEL and NUE both have low PEG valuations, (P/E to Earnings Growth).

BGS rose 69% over the past 12 months, and is currently trading near the high end of its 5-year P/E range. CTEL is much closer to its 5-year P/E low of 6.21 than its high 5-year high P/E of 39.65.  NUE is also in the low end of its 5-year P/E range, which was very wide: 7.72 to 104.86.  All 3 of these dividend stocks currently have above-average Price/Book ratios for their industries.

BGS-CTEL-PEG

Dividends: NUE is one of the stocks in the Dividend Aristocrats group, and has increased its dividends every year for the past 27 years. CTEL pays semi-annual dividends, and had ex-dividend dates in May and December in 2011, with equal payments of $0.386/share, a 53% increase over 2010’s dividend.  BGS also increased its dividend in 2011, from $.21 to $.23.

BGS-CTEL-DIVS

Covered Calls: All 3 of these stocks have options available , which offer an opportunity to improve upon your dividend yields and improve your cash flow.

The options listed in the 2 tables below have the following expiration months:

BGS: August; CTEL: Sept.;  NUE: July.

Frequently, selling covered call options can offer you much higher, short-term payouts than just collecting dividends. The covered call strategy will give you a second, immediate income stream, since you get paid within 3 trading days when you sell options.  NUE’s call options pay over 5 times the dividend payouts in this 5-month trade listed below.  BGS’s covered call options pay over 3 times more than its dividends pay over the next 6 months.

(You can discover more details for these and over 30 other lucrative option trades in our Covered Calls Table.)

BGS-CTEL-CALLS

Cash Secured Puts: Selling cash secured put options is another options trading strategy that also has high yield, quick cash payouts, such as those listed below.  The put options for NUE outpay the quarterly dividends by over 7 to 1 in this 5-month trade.

The annualized yields below are based upon a 100% Cash Reserve, which is the amount your broker will set aside in your account when you sell put options.  This amount equals 100 shares times the Put Strike Price. We covered more of the specifics of put selling in last week’s article. Unlike call sellers, though, put sellers don’t collect dividends.

(Note: There are more details on these and over 30 other high yield Cash Secured Puts trades in our Cash Secured Puts Table.)

BGS-CTEL-PUTS

Financials: Even though Nucor’s mgt. ratios look lower than these other 2 firms’, they are actually much better than its steel industry peers. Nucor’s website also says that its “5-year 371% return to shareholders beats all other S&P 500 firms”.  CTEL’s ratios are much higher than its telecom industry peers, plus it’s debt-free, and BGS has a superior ROE and in-line ROA and ROI to its food industry peers.

BGS-CTEL-ROE

Performance & Technical Data: Although these stocks are way above their 52-week lows,  CTEL and NUE are still down vs. 1 year ago, even though they both greatly improved their earnings.

However, investors have been rewarding CTEL and NUE this year, and they’ve been among the best stocks to buy in 2012 for price gains so far:

BGS-CTEL-PERF

Company Profiles:

BGS: B&G Foods and its subsidiaries manufacture, sell and distribute a diversified portfolio of high-quality, shelf-stable foods across the United States, Canada and Puerto Rico. B&G Foods’ products include hot cereals, fruit spreads, canned meats and beans, spices, seasonings, marinades, hot sauces, wine vinegar, maple syrup, molasses, salad dressings, Mexican-style sauces, taco shells and kits, salsas, pickles and peppers and other specialty food products. B&G Foods competes in the retail grocery, food service, specialty store, private label, club and mass merchandiser channels of distribution. Based in Parsippany, New Jersey, B&G Foods’ products are marketed under many recognized brands, including Ac’cent, B&G, B&M, Brer Rabbit, Cream of Rice, Cream of Wheat, Don Pepino, Emeril’s, Grandma’s Molasses, Joan of Arc, Las Palmas, Maple Grove Farms of Vermont, Ortega, Polaner, Red Devil, Regina, San Del, Sa-són Ac’cent, Sclafani, Trappey’s, Underwood, Vermont Maid and Wright’s. (Source: B&G Website)

CTEL: Established in 1992, City Telecom (H.K.) Limited provides integrated telecommunications services in Hong Kong via its own self-built fibre network. City Telecom’s wholly-owned subsidiary, Hong Kong Broadband Network Limited (HKBN), is the fastest growing broadband service provider in Hong Kong. HKBN offers a diversified portfolio of innovative products that service over 1,240,000 subscriptions for broadband, local telephony and IP-TV services.  CTI participated in the investment for construction of submarine cables, including Japan-US Cable to connect the US and Japan across the Pacific Ocean, as well as Asia Pacific Cable Network 2, connecting us to eight districts in Asia and allows direct connection with the major fixed network operators in China. (Source: City Telecom website)

NUE: Founded in 1940, Nucor is the largest steel producer in the US, and is the largest recycler of scrap steel in the world. Nucor produces many steel products, such as structural steel, sheet steel, plate steel, cold finished steel, and wire mesh, and also acts as a raw materials broker in the steel industry. (Source: Nucor Corp. website)

Disclosure:  Author is long BGS and short BGS call options.

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

Author: Robert Hauver © 2012 Demar Marketing All Rights Reserved

How To Turn Dividend Aristocrats Into High Dividend Stocks

By Robert Hauver

The Dividend Aristocrats are thought by many dividend investors to be the best stocks to buy for dependable dividends. This makes sense, since these dividend stocks have raised their dividends every year for the past 25 years. However, even with investors scrambling for low risk yield, some of these dependable dividend paying stocks are out of favor in the market, and appear undervalued:

Dividends:

ADM-WAG-DIVS

ADM-WAG-PEG

Valuations: ADM and WAG both have low PEG’s for next year and the next 5 years. They also have very low Price/Sales and Price/Book ratios. WAG has been discounted by the market this year, as a result of its ongoing negotiation with Express Scripts, over pay rates for prescription drugs. If WAG drops the Express Scripts deal, (approx. up to 5% of revenue), they estimate it’ll take off $.21/share from its 2012 earnings, which will put WAG’s projected 2012 earnings about flat with 2011.

Options: Although ADM and WAG aren’t high dividend stocks, you can easily earn a high yield on them, via selling options.

(These put and call option trades all expire in March for ADM, and April for WAG.)

Covered Calls: These 2 trades have call option premiums that will pay you 9 to 12 times the amount of the dividends during the 4-5 month terms. (See the highlighted areas in the tables below.)

Other bonuses: You’ll get paid your option premiums within 3 days of the trade, (often the same day),  and you’ll lower your risk via having a lower break-even price.

(You can see more details on this and over 30 other high yield covered call trades in our Covered Calls Table.)

ADM-WAG-CALLS

Cash Secured Puts: If you’re wary of this current market, and you’d like to be even more conservative, another strategy is to sell cash secured puts at a strike price near or below the stock’s current share price. You can often achieve an even lower break-even price, as seen below with WAG, and lower your risk even more. Selling cash secured put options is a strategy via which you get “paid now to wait”. However, unlike covered call sellers, put sellers don’t collect dividends.

The put options below pay approx. 11 to 13 times more than the dividends during this 6-7 month period.

(You can find more details on this and over 30 other high yield options trades in our Cash Secured Puts Table.)

ADM-WAG-PUTS

Earnings: Although WAG and ADM aren’t growth stocks, they both had strong EPS growth quarter-over-quarter, and are projected to grow at steady rates during their next fiscal year:

ADM-WAG-EPS

Financials: ADM just announced this week that it will build a 265 million liter (70 million gallon) biodiesel plant in  Alberta, Canada, which will increase ADM’s North American biodiesel production capacity by 50%. Biodiesel produced at ADM’s facility in Lloydminster will help fulfill Canada’s renewable diesel mandate. (Since July 1, 2011, all diesel fuel and heating oil sold in Canada must contain at least 2 percent biodiesel.)

ADM, as the 2nd largest ethanol producer, has had its ethanol margins squeezed by ongoing rising corn prices, hence the lower than avg. operating margin seen below:

ADM-WAG-ROE

Disclosure: No positions at this time

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

Author: Robert Hauver © 2011 Demar Marketing All Rights Reserved

2 Easy Ways To Triple Your Yields On Dow Dividend Stocks

By Robert Hauver

Do you think that Dow dividend stocks are the best stocks to buy now for dividends and safety? You’re not alone – the Dow has beaten these other major indexes year to date, and also in November, as of 11/10/11:

11

Although it trails the NASDAQ and the RUSSELL 2000 small caps, the Dow is also nearly even with the S&P 500 since the start of the March 2009 rally.

We found 2 Dow dividend stocks with good metrics and low beta’s, which are therefore less volatile than the market, but which also offer attractive dividends. Coca Cola Co. is also one of the Dividend Aristocrats, a group of dependable dividend paying stocks that have increased their dividends every year for the past 25 years:

CVX-KO-DIVS

You could also more than double your dividends on these stocks, via selling Covered Calls and Cash Secured Puts. (The call and put option trades listed below for CVX expire in June, and those for KO expire in May.)

Covered Calls: One of the big pluses of selling covered call options is that the call option premiums you sell are often more than 2 to 3 times the amount of the dividends during the term of the trade. (See the highlighted areas in the tables below.)

Two other bonuses: You’ll get paid your option premiums within 3 days of the trade, if not the same day, and, you’ll lower your risk by virtue of having a lower break-even price.

(You’ll find more details on this and over 30 other high yield covered call trades in our Covered Calls Table.)

cvx-ko-calls

Cash Secured Puts: If you want to be even more conservative, and achieve an even lower break-even price, selling cash secured put options below the stock’s current price is an options strategy via which you get “paid now to wait”. Unlike covered call sellers however, put sellers don’t collect dividends.

The put options below pay approx. 4 to 4.5 times more than the dividends during this 6-7 month period.

(There are more details on this and over 30 other high yield options trades in our Cash Secured Puts Table.)

CVX-KO-PUTS

Financials: For the most part, CVX and KO have better metrics than the DOW 30 averages, and both firms also have better metrics than their industry peers.:

CVX-KO-ROE

Valuations/Earnings: Although these monolithic firms certainly wouldn’t be considered growth stocks, they both had strong growth in their most recent fiscal years, and quarter over quarter. Analysts are currently predicting that CVX won’t be able to increase their earnings in their next fiscal year, but they may be wrong, given the volatility of oil prices that have arisen from the socio-political dramas of the Arab Spring, and many other oil-producing parts of the world. Coke has also managed to grow its earnings better than its beverage industry peers.

CVX-KO-PEG

Disclosure: Author is long shares of CVX.

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

Author: Robert Hauver © 2011 Demar Marketing All Rights Reserved

3 Defensive Dividend Stocks That Also Rallied In October 2011

By Robert Hauver

With the turbulent market spinning between rallies and corrections in 2011, are you looking for defensive dividend paying stocks that also have upside rally performance? The 3 Utilities dividend stocks in this article were some of the best stocks to buy in 2011 so far, since they’ve all beaten the S&P year to date, during the recent correction, and have also gained in price during the October 2011 rally:

ED-DUK-WGL-PERF

All 3 of these dividend stocks pay quarterly dividends and are listed in our High Dividend Stocks by Sector Tables.

DUK-ED-WGL-DIVS

Only Duke Energy has somewhat high options yields, and is listed in both our Covered Calls Table and our Cash Secured Puts Table.

Company Profiles:

WGL Holdings: WGL is a public utility holding firm that serves the D.C. metropolitan region.
Washington Gas, its leading subsidiary, has provided natural gas service to customers in the D.C. area for over 160 years and currently serves over one million customers in DC, Maryland and Virginia. WGL’s unregulated subsidiaries provide energy-related services to residential and commercial customers, including government organizations.

Con Edison: For over 180 years, Con Ed has served the metropolitan New York marketplace. Its principal business segments are: regulated electric, gas and steam utility activities, competitive energy businesses.  Con Edison of New York provides electric service to approximately 3.3 million customers and gas service to approximately 1.1 million customers in New York City and Westchester County, and also provides steam service in parts of Manhattan. The O&R division provides electric service to 301,000 customers in southeastern New York and adjacent areas of northern New Jersey and eastern Pennsylvania and gas service to 130,000 customers in southeastern New York and adjacent areas of eastern Pennsylvania.

Con Ed is a member of the S&P Dividend Aristocrats, having increased its dividends every year over the past consecutive 25 years.

Duke Energy: Duke is one of the biggest electric power companies in the US, supplying and delivering energy to approx. 4 million U.S. customers. Duke has approx. 35,000 megawatts of electric generating capacity in the Carolinas and the Midwest, and natural gas distribution services in Ohio and Kentucky. Duke’s commercial and international businesses own and operate diverse power generation assets in North America and Latin America, including a portfolio of renewable energy assets. Headquartered in Charlotte, N.C., Duke Energy is a Fortune 500 company.

Financials:

DUK-ED-WGL-ROE

Valuations/Earnings:

Con Ed just reported Q3 2011 EPS of $1.31, vs. $1.24 for Q3 2010, and 9 months’ EPS of $2.94 vs. $2.69 during the same period in 2010.

Duke just reported Q3 2011 adjusted diluted earnings per share (EPS) of $.50, vs. $.51 for Q3 2010, and also increased its full year guidance to $1.40 – $1.45/share, from $1.35 – $1.40.

All 3 firms have valuations below the broad utility sector avgs:

DUK-ED-WGL-PE

Author: Robert Hauver © 2011 Demar Marketing All Rights Reserved

Disclosure: Author owns no shares of WGL, ED, or DUK as of 11/3/11.
This article is written for informational purposes only and author will not be held responsible for
errors or omissions or losses sustained by third parties as a result of acting upon information herein.



How To Double Your Dividends On Oversold Dividend Aristocrats

By Robert Hauver

This volatile market has beaten up many dividend stocks this year, including the Dividend Aristocrats, a group of elite dividend paying stocks who’ve raised their dividends every year for the past 25 years. In fact, Emerson Electric has increased its dividends for the past 54 consecutive years, and PPG has increased its dividends for the past 28 consecutive years.

Valuations: Both firms have had good earnings growth in their most recent fiscal years and quarters, but EMR looks more undervalued on a PEG basis. Both firms’ Price/Book ratios are roughly in line with their peers.

Selling Options: A pathway to 20%-plus yields.

By selling options on these dividend stocks, you can earn over 10 times the dividend yield for EMR during the next 4 months, and nearly 5 times the dividend yield for PPG.

(The call and put options trades listed below expire in Jan. 2012 for EMR and in Feb. 2012 for PPG.)
You’ll find more details on this and many other high yielding covered call trades in our Covered Call Table.
Covered Calls:

Cash Secured Puts:
These put trades also offer high options yields, and you can also attain a lower break-even price below the current 52-week low of both stocks.
You’ll find more details on this and many other high yield cash secured put trades in our Cash Secured Puts Table.

Financials: Both firms’ mgt. efficiency and margin ratios are superior to that of their industries.

Share Performance/Technical Data: Both firms are approaching the oversold threshold of 40 in their Relative Strength Index readings, and are less than 6% above their 52-week lows.

Disclosure: No positions at this time.
Disclaimer: This article is written for informational purposes only, and isn’t intended as investment advice.

4 Dividend Aristocrats That Beat The Market Correction

By Robert Hauver

The S&P sank -17.27% from July 7th to its August 8th, causing many portfolio losses. Where can you find some solid dividend stocks to help you through the next market pullback? Try the Dividend Aristocrats – an elite group of dividend stocks that have raised their dividends for at least 25 consecutive years. Four members of the Dividend Aristocrats actually declined less than the S&P, rebounded more, AND are higher than their July 7th marks. Here’s how these four dividend paying stocks performed during and after the market correction:
ED-KO-MCD-HI-LOW
Three of these iconic firms offer basic items: famous brand versions of junk food, soda pop/bottled water, and apparel. Con Ed is the major diversified utility in the metro NY area.

Dividends:
Con Ed is listed in the Utilities section of our High Dividend Stocks By Sector Tables.
ED-KO-MCD-DIVS

Financials:
Although McDonalds and Coca-Cola have very strong mgt. metrics and good margins, further research will show that all 4 firms have lower ROE’s and higher ROI’s than their respective industry avgs. Relatively speaking, however, their reps as safe haven stocks renders them more attractive than their peers during a downturn.

ED-KO-MCD-ROE

Valuations: KO has superior EPS growth stats in the table below, and is the most undervalued on a PEG basis. Of course, utility stocks, such as Con Ed, aren’t known for having great growth figures, due to the heavily regulated environment in which they operate.
ED-KO-MCD-PEG

Two strategies that will bolster the defensive strength of these stocks are selling covered calls and cash secured puts.

VFC has the highest options yields of these 4 stocks, and we’ve listed it in our Covered Calls and Cash Secured Puts Tables, along with many other option selling trades.
The call and put premiums for VFC’s Feb. 2012 options are over 8 times the dividend amount during this 6-month term.

Covered Calls:

ED-VFC-CALLS

Cash Secured Puts:
ED-VFC-puts

Disclosure: No positions at this time.

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

© 2011 DeMar Marketing. All Rights Reserved.

How To Earn A 10%-Plus Yield On Dividend Aristocrats Stocks

By Robert Hauver

Looking for dependable dividend paying stocks? This week we’ll focus on Dover Corp. and PPG industries; both are members of the S&P Dividend Aristocrats, a group of firms which have increased their dividends every year for at least the past consecutive 25 years. 

Dover just increased its quarterly cash dividend to $0.315 /share, from the previous $0.275/share, an increase of 14.5%. The increased dividend will be paid on September 15, 2011 to shareholders of record as of August 31, 2011. This marks Dover’s 56th year of consecutive yearly dividend increases.

DOV-PPG-DIVS

Selling Covered Calls:

This month’s turmoil has done 2 things that can help increase yields on dividend stocks: prices have been pushed down, and volatility has surged higher. You can take advantage of this volatility by selling covered calls and selling cash secured puts for these stocks.This strategy gives you 2 income streams: dividends and call options premiums, which, as you’ll see below, offer much higher payouts than dividends.

For Dover, you’d collect $.945 in dividends and $5.90 in call option premiums, for a total of $684.50 for for each 100 shares of DOV you buy and each option contract you sell., and earn a 12.5% nominal yield over a 7-month period. (One options contract corresponds to 100 shares of the underlying stock).   In this trade, you turn a stock with 2.92% annualized dividend yield into a 21.18% yield, thanks to the high call options yield).

DOV-PPG-CALLS

PPG also currently has a high call option yield that’s approx. 6 times the dividend yield. In this trade, you’d collect a total of $804.00 in dividends and call option premium $, for each 100 shares of PPG you buy and each option contract you sell. You’d earn a 10.73% nominal yield in a 6 month-plus period.

You can find more details on these and other current covered calls trades in our Covered Calls Table.

Selling Cash Secured Puts:

Selling cash secured put options is another way to goose the yield from a stock. Recent surging volatility has pumped up put options prices, allowing put sellers to capture higher premiums in a shorter amount of time. Although put sellers don’t receive dividends, they do collect put premium $ within 3 days of selling put options. (The same is true for call options). So, instead of waiting for a quarterly dividend, you get paid right away.

When you sell a put option contract, you’re obligating yourself to potentially have the shares sold/put to you by a future date. A cash secured put means that your broker will hold a cash reserve of the value of the strike price times the amount of shares you may have to buy.  In the DOV example, your cash reserve is $5000.00, 100 shares times the $50 strike price. (Each put option contract = 100 shares of the underlying stock.)

The put sales below take two different approaches: The DOV trade is “out of the money”, meaning that the put strike price is below the current share price. This more conservative approach gives you a lower options yield, but a much lower breakeven price which is below the current share price.

The PPG put trade is more aggressive, where you’d sell a put option at a strike price that’s “in the money”, above the current share price. This gives you a higher options yield, but your breakeven is higher than the first approach, although it’s still over 10% below the current share price.

You can find more details on these and other current cash secured puts trades in our Cash Secured Puts Table.

DOV-ppg-PUTS

Financial Metrics:

DOV-PPG-ROE

Valuations:

Both firms had strong second quarter reports, and Dover increased its earnings guidance for the full year.

DOV-PPG-PEG

Company Profiles:

Dover Corp. is a global producer of equipment, specialty systems and value-added services. The firm operates in four segments: industrial products, fluid management, engineered systems and electronic technology markets.

PPG is a leading coatings and specialty products and services company, serving customers in construction, consumer products, industrial and transportation markets and aftermarkets. PPG has manufacturing facilities and equity affiliates in more than 60 countries.

Disclosure: No positions at this time

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