Friday, September 2, 2011

Adding to MOLX & LMT

Image representing Lockheed Martin as depicted...Image via CrunchBase          A quick review of my list of dividend machines revealed two buys in this down market.  Readers of this blog know that the sole purpose of income investing is to generate income.  We know stock prices will move up and down.

          LMT and MOLX are two companies whose stock price is down at least 10 percent from the date each was profiled as a dividend machine.   I like to add to positions when I can get it on sale.  Each of these companies still meet my criteria as a dividend machine.

          Today you could buy LMT at about $71.20 and write a December $77.50 call for $1.80.  LMT's quarterly dividend is $.75.  Writing this call, also known as selling a call, creates income greater than two dividend payments.  Furthermore if the buyer of my call takes LMT at $77.50 we book a capital gain of 11.37 percent.  My kind of trade.

          MOLX is trading today at about $20.30.  You can write a November $22.50 call for $.75.  Again this meets our criteria.  The call premium is almost equal to a whole year of dividends which are $.80.  Moreover, if MOLX is bought by our call buyer, we book a 14.53 percent gain.

          You have to have ice in your veins to do this kind of investing.  The income is worth it for me.  You will have to determine if this strategy works for you.

Very Truly Yours,

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