by Robert Hauver
After the big gains in 2013, (and subsequent declining yields), income investors are scouring the market for safe yields in 2014. With this in mind, we took a look at the 2 highest yielding dividend paying stocks in the DOW 30: AT&T, (T), and its arch rival Verizon, (VZ). In particular, we compared these 2 stocks’ next quarterly dividends to covered call premiums, in order to see if you could increase your yield, while gaining some downside protection.
DIVIDENDS: Both of these stocks are listed in our High Dividend Stocks By Sector Tables, in the Telecoms section. AT&T has a higher dividend yield than Verizon, but Verizon’s 5-year dividend growth rate trumps AT&T’s.
COVERED CALLS: These April 2014 covered call options trades both have strikes above each stock’s price/share, which offers you a chance for some assigned price gains, in addition to increasing the yield above that of the dividends:
Here are the 3 main income scenarios for each trade. You can find more details for these 2 trades and over 30 others in our free Covered Calls Table.
Since VZ’s strike price is further above its share/price, you have more of a chance for potential price gains:
EARNINGS: To be sure, neither of these stocks are growth stocks – here’s how they stack up against each other:
VALUATIONS: The good news is that both stocks look to have more attractive P/E’s in 2014. VZ is commanding a premium over T in its Price/Book and P/E ratios.
FINANCIALS: VZ has used more debt for financing than AT&T has, and has a higher Operating Margin and ROI:
PERFORMANCE: While VZ lagged the market during 2013, AT&T went absolutely nowhere over the past 52 weeks:
Author: Robert Hauver,copyright 2014 DeMar Marketing, All Rights Reserved.
Disclosure: Author had no positions 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.