Wednesday, May 4, 2011

Intel, symbol INTC, income update

                Income Investors, Intel Corporation, symbol INTC, defines the opportunity to bring in a little extra money by writing (also known as selling) a covered call.  When I profiled INTC, as a dividend machine on March 21, 2011 everyone thought INTC was dead; which is why it sold for under $20 bucks.

                Today INTC closed at $23.50 per share.  I guess the folks who called it dead were wrong; at least for this quarter.  Today you could have sold a covered call option with a strike price of $26 and a premium (income to you) of $.34 per share.  The option expires August 20 of this year 2011.  If you bought this dividend machine before today, you get the call premium and the dividend as income.  If INTC’s stock price is at or greater than $26 on August 20, the call buyer will buy it from you at $26.00. Think about this.  Today you would have to commit $23.50 per share with the chance of receiving $26.00 per share plus the $.34 premium.  That alone is an above 10 percent return and if you write calls on shares you bought at $20 per share, your return approaches 31%.  Buy at $20, sell at $26, receive a call premium of $.34 and a dividend of $.18 yields a nearly 32% return.

                So what happens if you bought today at $23.50 and the stock price in August is less than $26; maybe even less than the $23.50 you paid?  Well you may have overpaid, (this can happen in May) but you will have bought a dividend machine that will increase your income every year.  Moreover, INTC may provide you with another opportunity for covered call income.  If INTC is not as dead as they said it was in March, you may get the capital gain from selling at $26.00.  I like that risk reward relationship.

                Well selected dividend machines make my monthly income and they can do it for you too.

Very Truly Yours,
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