Wednesday, January 12, 2011

Almost Div Machines Make More Money!


Almost dividend machines can create more cash flow than those companies that meet our strict criteria to qualify as a true dividend machine. We hate to lose our dividend machines so we tend not to use covered calls to create more income. However, companies that are almost dividend machines can create both dividend and covered call income and the capital gain if the call buyer executes the option and buys our stock from us.

These solid companies may not qualify as dividend machine but they are close so they are pretty safe. For the purpose of this blog, we will throw out companies that miss the cut because of too much debt. If we have to hold the "B" team of dividend machines we want to make sure we hold the most solid.

Look at the companies that missed our criteria either because their dividend is less than the 3% we require or because they may not have had a dividend increase every single year.

A current event, a change in technology, a change of management are just a few examples of events that can create interest in a company and make someone buy a call from us. You receive three sources of income from one stock because we can sell calls; we receive the capital gain since the call is always above our cost basis and we receive the dividend.

See my next blog on NYB to see an example of this strategy.

Very Truly Yours,


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