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…

A Major Oil High Dividend Stock With Undervalued Growth

By Robert Hauver

Are there any “bargain basement” high dividend stocks with strong financials, undervalued earnings growth, and future dividend growth? Surprisingly, British Petroleum, (BP), an energy stock that many investors dumped, after its Gulf oil spill debacle, looks like one of the best stocks to buy once again for these attributes.

Investors have been shunning Big Oil stocks for the past year, so this sub-industry group as a whole is down a bit over -1%. However, unlike two of its larger peers, Chevron, (CVX), and Exxon, (XOM), BP has actually been getting support from institutional buyers in the past few months. Technically speaking, BP is also in the upper region of oversold territory, with its RSI of 35.14:

BP-CVX-XOM-PERF

A lot of this new support has to do with BP’s improving earnings and low valuations.  BP has logged strong EPS growth in its most recent fiscal year, and recent quarter. Surprisingly, BP’s sales growth over the past 5 years topped both Exxon and Chevron, and was just above industry averages.  Although BP is only projected to grow 6.36% in its next fiscal year, its very low P/E gives it an enticing PEG ratio:

BP-PEG

Dividends: After the 2010 Gulf spill, BP needed to eliminate its $.84 quarterly dividend payout for the balance of 2010, but then reinstated in 2011, at 50% less, ($.42/quarter). In 2012, BP has been able to increase its quarterly dividends, for the first time since the spill, raising them over 14%, to $.48/share. BP has been a cash machine for a long time, and as it works through the Gulf settlement payouts, its cash flow will only get even better.

BP foresees future dividend increases, as it stated earlier in 2012: “With operating cash flow generated by BP in 2011 reaching some $22bn – over 60% higher than in 2010 – CEO Bob Dudley confirmed the company’s expectation that net cash flow in 2014, in a $100 oil price environment, would be around 50% higher than in 2011. Half of the additional cash is expected to be used for re-investment and half for other purposes including increased shareholder distributions. 2012 will be a year of increasing investment and milestones as we build on the foundations laid last year. As we move through 2013 and 2014, we expect financial momentum will build as we complete payments into the Gulf of Mexico Trust Fund, restore high-value production and bring new projects on stream.” (Source: BP website)

BP’s dividend yield is now above those of CVX and Exxon, and is also above industry averages:

BP-CVX-XOM-DIVS

Covered Calls: Many income investors have begun selling covered call options in order to increase their income from dividend paying stocks. This options trading strategy is an easy way to double, or even quadruple your dividends, depending on the stock.

If you already own the stock, you can then sell 1 call option contract for each 100 shares that you own. (One option contract corresponds to 100 shares of the underlying stock.)

If you don’t own the stock, here’s the sequence for selling covered calls on dividend stocks:

1. Buy the stock, in 100 share lots – example, buy 200 or 300, instead of 250 shares.

2. Sell 1 call option contract for each 100 shares that you own, at a strike price above the stock’s current share price. The further above the share price you sell, the less premium you’ll receive. The further out in time you sell, the more premium you’ll receive, which will lower your break-even. You receive this option $ within 3 days of selling, often even the same day.

3. Collect whatever quarterly dividends are due, as they pass their ex-dividend dates.

4. At expiration time, if the stock has risen above the strike price, your shares will be sold at the strike price, and you’ll also pocket the difference between the strike price and your cost per share.  If the stock isn’t above the strike price then, the call option will expire, leaving you with the initial call premium $ that you received, plus your dividends, as your profit.

These BP Oct. 2012 call options pay nearly 3 times the amount of BP’s 2 quarterly dividends during this 7-month period. This $45 Oct. 2012 call option also holds a potential assigned yield of 2.66% annualized, ($.65/share, the difference between the $45 strike price and BP’s $44.35 share price.)  The catch is that your BP shares will be sold/assigned at or near expiration time, if BP rises above the $45 strike price.

(You can find more details for this trade and over 30 other high options yields trades in our Covered Calls Table.)

BP-CALLS

Cash Secured Puts: If you’re still wary of BP’s gulf spill headline exposure, an alternative options trading strategy would be to sell cash secured put options, and literally “get paid now to wait”.

The BP OCT. $44.00 put option, which is below BP’s share price, would pay you $3.65/ share, ($365 per option contract). This gives you a lower break-even price, of $40.35.

High Options Yields: This put option pays out 3.8 times what BP’s dividends pay over the next 7 months. In addition, you’ll receive your options premium $ within 3 days of making the trade, often even the same day, so you’ll have the use of this $ now, instead of waiting for the quarterly dividends.  (Note: Put sellers don’t receive dividends.)

If BP is below $44.00 at or near the Oct. expiration, you’ll be sold/assigned 100 shares of BP, for every put contract that you sold.  However, your net cost will only be $40.35, ($44 strike price, minus the $3.65 put bid premium you received when you sold the put).

(You can find more info for this trade and over 30 other high yield Cash Secured Puts trades in our Cash Secured Puts Table.)

BP-PUTS

Financials: While they aren’t quite as impressive as some of Chevron’s and Exxon’s figures, BP’s financial metrics are all above industry averages, with the exception of its operating margin. Although BP’s Debt/Equity ratio is higher than CVX and XOM, BP has a very high Interest Coverage figure of 31.8:

BP-ROE

Disclosure: Author is long shares of BP and XOM, and is short BP put 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

The Top 5 US Dividend Stocks For 2012

By Robert Hauver

Which dividend paying stocks paid out the most cash in dividends in 2011? Did they raise their dividends enough to stay among the top US dividend stocks in 2012 for cash payouts? 2011’s winners were all Dow dividend stocks, all raised their dividends in 2011, and have the size and cash necessary to make this short list.

This group paid investors approx. $6 billion to $10 billion-plus in 2011, and appear likely to increase those amounts in 2012, given their historic and recent dividend growth rates. (Although though GE lowered its dividends in 2009, it started increasing them again in 2010, and continued to do so in 2011, with a huge 21% hike):

T-XOM-DIVGROWTH

Pending Quarterly Dividends: These stocks pay quarterly dividends, and three of them are listed in our High Dividend Stocks By Sectors Tables. The projected dividends listed in the following table are all based upon the most recent quarterly dividends paid:

T-XOM-GE-DIV2012

Other than GE, investors rewarded these stocks for their dividend payouts in 2011- their share performance beat the S&P, which returned a big goose egg for 2011.  Chevron, Exxon, and J&J also beat the Dow’s 5.53% return in 2011.  So far in 2012, investors are favoring small caps, but that increased “risk on” approach will probably fade, in favor of large caps, when volatility returns to the market:

T-XOM-PERF

Selling Covered Calls: Even though these stocks don’t have the high options yields that we often write about, you can still substantially increase your dividend yields, via selling covered call options. We’ve listed only options for T, XOM, and GE here, as JNJ and CVX currently have much lower options yields.

In the July 2012 XOM covered call trade below, XOM’s call options sell for nearly 4 times the amount of its next 2 dividends.  The trade-off is that your shares will potentially be sold/assigned if they rise above the $87.50 July strike price for XOM. But you’d also receive a capital gain of $.73/share, the difference between the price/share of $86.77 and the $87.50 strike price, if the shares are sold/assigned.

The call options in the table below expire in Oct., July, and Sept. for T, XOM, and GE respectively.

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

T-XOM-CALLS

Selling Cash Secured Puts: As T, XOM, and GE are all relatively close to their 52-week highs, some investors may choose to sell cash secured puts below the current stock price, in order to achieve a lower break-even entry price.

Selling cash secured put options is an investing approach which pays you to wait: just like selling call options, you’ll get paid now for selling put options. But, if the stock goes below the put strike price at or near expiration, you’ll have it assigned/sold to you for a cost equal to the strike price.  However, your break-even will be lower than the strike price, due to the put premium you receive when you sell puts.

In general, most options aren’t exercised until sometime near or at their expiration date. As an option seller, this works in your favor, as the time value of the option that you’ve sold declines steadily.

The T Jan. 2013 $30.00 put strike price below pays you $3.25, making a break-even of $26.75, which is below T’s 52-week low.  (The puts in the table below expire in Jan. 2013, July 2012, and June 2012 for T, XOM, and GE respectively.)

(Note: You can see more info on these and over 30 other Cash Secured Puts trades in our Cash Secured Puts Table.)

T-XOM-PUTS

Valuations: Although these venerable large caps wouldn’t be considered growth stocks, GE’s PEG ratio is very near to the 1.00 undervalued threshold. XOM has a  negative PEG, due to analysts’ current negative growth forecasts for its next fiscal year. However, as we’ve seen before, oil could rise, or even spike much higher, in reaction to world events, particularly in the Middle East.  XOM has also turned in earnings surprises in 3 out of the last 4 quarters.

Ather issue for XOM is its increased exposure to natural gas via its 2010 purchase of natural gas giant XTO. With supplies coming on, natgas prices are forecasted to drop until US infrastructure can be built up enough to support increased demand.  However, with the current US administration just this week coming out with trucking tax incentives for natgas truck purchases, and other firms building a chain of US natgas fueling stations and liquid natural gas export treminals, demand for natgas may catch up with supply again sooner than later.

T-XOM-PEG

Financials: GE’s debt/equity ratio is much higher than the rest of the group, but it does have an interest coverage of 2.3.  XOM and CVX have metrics that are mostly in line with their Oil Majors peers. JNJ’s numbers are superior to its peers, and, with the exception of a slightly lower ROA, T’s numbers outshine its peers.

T-XOM-ROE

If you’re an income investor, this elite group holds some of the best stocks to buy in 2012 for dependable dividends.

Disclosure: Author is long GE, CVX, XOM, and T shares, and short GE 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

2 Dow Dividend Stocks With P/E’s At 5-Year Lows And High Option Yields

By Robert Hauver

If you’re wondering about which Dow dividend stocks are the best stocks to buy now for dependable dividends, consider this:  Exxon and AT&T are both very near their 5-year P/E lows. In addition, AT&T is cheap on a P/Book basis, whereas Exxon has traditionally commanded higher multiples than most its oil industry peers:

T-XOM-PE

Dividends: XOM upped its quarterly dividends in Q2 2011 to $.47/share from $.44, while T raised its dividend to $.43 in Q1 2011, from $.42. AT&T’s 5-year dividend growth rate exceeds its peers, and Exxon’s is slightly under its peers. However, Exxon has also traditionally split its shareholder “paybacks” between dividends and share buybacks.

You’ll find T listed in the Telecoms section of our High Dividend Stocks By Sector Tables.

T-XOM-DIVS

High Options Yields: The call and put options listed below for these Dow dividend stocks  expire in Jan. 2012 , and greatly exceed the quarterly dividends over this 4-month term.

In fact, Exxon’s call options pay almost 9 times what the dividends pay.

There are further details on this and several other high yielding covered call trades in our Covered Calls Table.

Covered Calls:

t-xom-calls

Cash Secured Puts: AT&T’s Jan. 2012 $27.50 puts achieve a break-even price that’s nearly 4% below its 52-week low. As with the call options, the put options have much higher payouts over this term than the quarterly dividend.

T-XOM-PUTS

You’ll find more details on this and many other high yield cash secured put trades in our Cash Secured Puts Table.

EPS Growth: Both T and XOM enjoyed very good earnings in their most recent fiscal years. AT&T’s iPhone deal with Apple was very positive for earnings, and Exxon benefited from strong crude prices.  T’s 12-month PEG is lower than XOM’s, thanks to very low growth forecasts for XOM.  Of course, nobody really knows if global demand and prices will rise enough during the near term for XOM to achieve stronger growth next fiscal year or not.  However, it’s a reasonably logical long term bet that Exxon will benefit from long term crude demand, and will also benefit also from natural gas demand, with its purchase of XTO Energy, the biggest natural gas firm in N. America. In fact, Exxon execs are predicting that natural gas will replace coal as the 2nd most used energy source by 2030. One other thing to note is that crude futures prices have been tending to rise with positive economic data, so, if the US economy continues to hold up, Exxon should probably benefit.

AT&T’s growth forecasts are somewhat tempered by the loss of its iPhone exclusivity, and also from increased competition and market saturation. However, AT&T may have an advantage with the Apple’s new iPhone lineup, since AT&T’s network can handle the faster speeds of the new phone. Apple will also give AT&T an exclusive for the 3GS iPhone that will be given away to customers who sign up for a 2-year contract. One uncertainty obscuring AT&T’s future is whether or not the T-Mobile deal will be approved.  The US Justice Dept. currently has a suit  to block the deal, due to fears of higher prices for consumers.

T-XOM-PEG

Financials: AT&T’s financial ratios are above industry avgs., excepting its operating margin, which is below its peers”s 16.04% avg.  Exxon’s ROE and ROI are better than its peers, but it falls below industry avgs. in the remaining categories.

T-XOM-ROE

Share Performance (through 10/6/11): XOM fell more than T in this past trading quarter’s correction, due to being in the Basic Materials sector, which was the 3rd worst performing sector during this time. However, both stocks have outperformed the S&P over the past month, year, and year-to-date:

T-XOM-PERF

Disclosure: Author is long shares of XOM and T.

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

© 2011 DeMar Marketing.  All rights reserved.

3 Major Oil Dividend Stocks With High Options Yields

By Robert Hauver

Looking for ways to play $100+ per barrel oil?  The Energy Sector has many dividend paying stocks, in fact, many of them are listed in the Energy section of our High Dividend Stocks By Sector Tables. Although most of the Major Integrated Oil stocks don’t have such high dividend yields, there are some that can still give you double digit high options yields, via selling covered call options and cash secured puts. We found 3 Oil dividend stocks with attractive mgt. metrics, good margins, and good growth prospects for 2011:

Conoco Phillips, (COP), PetroChina, (PTR), and, the big kahuna, Exxon Mobil, (XOM). Here’s how these 3 firms compare vs. their peers in the Oil Majors group:

ROE-XOM-COP-PTR2011-02-24

Conoco has the lowest margins of this group, due to its heavier exposure to refining, a lower margin part of the oil biz.  However, Conoco has been divesting poor-performing assets, and is moving to concentrate more on exploration and production, which should improve margins.  Two other factors favor COP’s future earnings: 1. COP has a higher proportion of natural gas than its peers and should benefit from environmental concerns that favor natural gas. 2.  COP also has significant ownership in pipeline and other transportation assets, which offer steady income that is not as tied to variations in commodity prices. (Source: Morningstar)

PetroChina, China’s largest oil and gas company, looks to secure future domestic and international supply to feed a nation hungry for energy. Refining operations lost money over the past few years as the price of crude oil soared while the price for refined products in China remained stagnant, due to government controls. Now, the Chinese government will revise product prices if oil prices fluctuate over a given period of time. The new system should improve refining margins. (Source: Morningstar)

ExxonMobil sets itself apart among the other supermajors as a superior capital allocator and operator. Resource nationalism is becoming an increasingly greater challenge to international oil companies’ (IOC) ability to grow production. Countries rich in oil and gas reserves are increasingly picky when choosing partners, such as Exxon, to work with their national oil companies (NOC) to explore for, produce, and transport to market their oil and gas reserves. With its deep pockets, expertise, and integrated operations, Exxon can tackle nearly any mega-project regardless of scale, location, or operational difficulty. (Source: Morningstar)  In addition, Exxon’s purchase of XTO positions it as a major player in the growing utilization of natural gas, which Exxon predicts will overtake coal as the 2nd most utilized fuel source in the coming years.

Looking ahead to 2011 earnings, Conoco and PetroChina appear undervalued:

XOM-COP-PTR-PEG-2011-02-24

While XOM’s 2011 PEG is over 1, it generally commands a premium to its peers in the market, hence the higher P/E and PEG’s.

Here’s how you could lock in high option yields now, by selling Covered Call options:

XOM-COP-PTR-CALLS-2011-02-24

Note how the above call options are approx. 3 times the price of the dividends. Another positive to the Covered Call and Cash Secured Put options strategies is that you receive the option premium $ within 3 days of selling calls and puts, as opposed to waiting for each quarterly dividend. The flip side, is that your participation in possible future price gains is limited to your potential assigned yield – (the difference between the strike price and the stock’s cost basis).  Our Covered Calls Table can give you more info about these and other Covered Call options trades.

Conversely, if the current high market prices make you nervous, you could also earn high options yields by selling Cash Secured Puts for any of these stocks, thereby receiving much more $ from their put options, than their current dividend yield will earn you. You’d also have a lower break-even price:

XOM-COP-PTR-PUTS2011-02-24

There’s more info about these and other put options trades in our Cash Secured Puts Table.  (Note: Put option sellers don’t receive dividends, we listed the dividends for comparison only .)

Disclosure: Author is long XOM shares, and may be short COP puts in the near future.

Disclaimer: This article is written for informational purposes only.

The Top 5 U.S. Dividend Paying Stocks for 2010

By Robert Hauver

Have you ever wondered which dividend paying stocks actually pay out the most money in cash dividends to their shareholders?  We posed this same question in 2009, in our article,           “The Top 5 Dividend Stocks for 2009”, a 3-part series, which identified the 5 firms who paid out the most cash to shareholders, and we explored various ways of investing in and profiting from these dividend stocks.

Four US firms made the top 5 list in 2009: AT&T, GE, Exxon, and Chevron.

In 2009, dividends were eliminated, or slashed by many venerable firms, due to the recession, particularly in the Financial  sector, which formerly accounted for over 20% of 2008 dividends paid out in the S&P, but shrank to paying out less than 10% of the total in 2009.

According to Standard & Poor’s, the average dividend yield in the Telecom Sector has taken the biggest jump so far in 2010, rising from 5.53% in 2009 to 6.29% this year, while the Financial sector has continued its yield decline, from a 2008 average yield of 4.44%, down to 1.22% in 2009, and down again to 1.14% in 2010.

The Telecom sector has many firms listed in our High Dividend Stocks by Sector tables.

Here’s how the Sectors average dividend yields and overall contributions to the overall S&P 500 ranked as of 5/26/10:

INDUSTRY SECTOR

SECTOR DIVIDEND CONTRIBUTION

SECTOR DIVIDEND YIELD

SECTOR DIVIDEND YIELD

5/26/2010

(As of 5/26/2010)

2009

Telecom Services

8.58%

6.29%

5.53%

Utilities

8.04%

4.75%

4.26%

Consumer Staples

17.57%

3.25%

2.96%

Health Care

13.29%

2.37%

2.03%

Energy

12.00%

2.35%

2.05%

Industrials

11.47%

2.28%

2.26%

Materials

3.42%

2.10%

1.76%

Consumer Discretionary

7.74%

1.53%

1.44%

Financials

8.82%

1.14%

1.22%

Information Technology

9.08%

1.02%

0.89%

S&P 500

100.00%

2.10%

1.95%

(SOURCE: Standard & Poor’s)

So, did any of the same top 2009 dividend paying stocks make it to the top 5 for 2010?

As it turns out, 3 out of 4 of these firms are poised to pay out even larger amounts of cash dividends in 2010.  As expected, GE, which cut its dividend in 2009 to $.10/quarter, from $.31/quarter, didn’t make the top 5 this year.

Here’s our list of the projected Top 5 U.S. Dividend Paying Stocks for 2010:

2010 Projected Payouts (in Billions$) Total Projected Annual Dividend/Share
AT &T  (T)

$9.92

$1.68

Exxon  (XOM)

$8.27

$1.76

Johnson & Johnson (JNJ)

$7.93

$2.11

Pfizer (PFE)

$5.81

$0.72

Chevron (CVX)

$5.79

$2.88

We’ve also compiled a list of projected upcoming ex-dividend dates and quarterly payouts/share for these Top 5 dividend stocks.

Projected Upcoming Dividend Dates Projected Quarterly Dividend/Share
AT &T  (T)

7/2/2010

$.42

Exxon  (XOM)

8/11/2010

$.44

Johnson & Johnson (JNJ)

8/27/2010

$.54

Pfizer (PFE)

8/5/2010

$0.18

Chevron (CVX)

8/17/2010

$.72

A looming issue for dividend investors is the status of the qualified dividends tax rate, which is currently at 15% until the end of 2010.  If Congress lets this tax rate simply expire, dividends could be taxed at the old 39.6% rate, which may very well inspire some dividend paying stocks to increase their payments in the fourth quarter, in order to still achieve the lower tax rate.

Disclosure: Author currently holds shares of XOM, T, and CVX.

Disclaimer: This article is written for informational purposes only.

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.

Dow Dividends vs. Selling Long-Term Puts

By Robert Hauver

Consumer Goods Dow 30 component Procter & Gamble, (PG), languishes at the bottom of our High Dividend Stocks by Sector consumer goods table, with a lower dividend yield, (2.82%), than the other dividend paying stocks in this sector table.

Looking at other solid Dow 30 giants, their dividend yields were equally unimpressive.  For example, Coke, (KO), has a 2.87% dividend yield, and Exxon only pays 2.24%.  Is there a way to invest in these great companies, but get paid a higher yield?  Absolutely.  By selling long-term puts, with a January 2011 expiration, you can earn nearly 3 times the current dividend yields on these stocks.  In addition, you’ll get paid this money now, and not have to wait to collect it over the next year. (Brokers have to deposit the option premium money in your account by 3 days after the trade).

Here’s a table illustrating this strategy for these 3 stocks:

STOCK SYMBOL PRICE ANNUAL YIELD JAN 2001 PUT STRIKE PRICE JAN. 2011 PUT YIELD ANNUALIZED
Coke KO $57.18 2.87% $55.00 7.74%
Procter & Gamble PG $62.48 2.82% $60.00 8.40%
EXXON XOM $74.87 2.24% $70.00 7.76%

Here are some other considerations about selling puts vs. just buying stocks and collecting dividends:

1. Taxes: Your put gains will be taxed at your personal tax rate, not the 15% qualified dividend tax rate. Compare your personal rate to see if it’s worth it to you. For example, if you had a Federal tax rate of 35% and a State tax rate of 10%, you’d net 3.48% for the Coke put, vs. 2.44% for the Coke dividend, after taxes. The lower your personal tax rates are, the more advantageous the put selling strategy is, in terms of yield.

2. Capital Gain Timing: Your put gains are taxable when the put expires, is assigned, or you close out your postion.  So, in the above examples, if you simply let the puts expire in 2011, you’d be liable for taxes on these gains on your 2011 taxes.

3. Price Appreciation: The put premium you receive now is the only income and gain you’ll earn on this trade, vs. possible future price appreciation in the stock.

4. Long-term exposure: Although your break-even will be lower on the stock after you’ve sold puts, you’re still obligated to buy the stock, if it gets assigned to you at any time before expiration. So, if you’re wary of another market meltdown , you may not want to sell puts this far out in time.  There are other premiums available, with 2010 expiration dates that would accomplish this.  Just keep in mind that your capital gain would then be in 2010, not 2011.

Disclosure: Author long XOM, PG

Disclaimer: This article is for informational purposes only.


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

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 2 – Protecting Your Dividend Yield – May 15, 2009

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.