Monday, September 12, 2011

ITW Dividend Machine with Call Option Income

          Earlier today I profiled ITW as a dividend machine.  I want to share with you another income opportunity on ITW and that is to sell calls against ITW.  Here are the facts:  you can buy ITW today at about $41.25, you will receive a dividend of $.36 on October 12, 2011; you can sell a December $45 call against your holdings and you immediately receive a call premium of about $1.75.
   If the market continues to tank and takes ITW with it and the call buyer does not take your shares you are left holding ITW.  The dividend yield alone on your shares will be 3.5% and when you factor in this one call premium of $1.75 your annual income yield jumps to 7.73%.  If the market improves, taking ITW with it and the call buyer takes your ITW shares your return is around 14%.   Where else are you going to get that kind of income?

          This is simple income investing at its finest.

Very Truly Yours,


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