Tuesday, November 8, 2011

QCOM covered calls

Image representing Qualcomm as depicted in Cru...Image via CrunchBaseIncome investors, I have written about Qualcomm as a cash cow three times during the first year of this blog.  Today was another example of how to use Qualcomm in your income investing strategy.

Today you could buy QCOM at $57.03 today and write (sell) a January, 2012 $62.50 covered call receiving $.82 per share.   You immediately receive the $.82 per share which is almost equal to QCOM's annual dividend rate of $.86 per share.    If you end up continuing to own QCOM for a year you will be rewarded with over a three percent yield when you combine your cash dividend and your call option premium.   You might even be able write additional calls for even more income.  QCOM has raised the dividend every year for at least 5 years, earns three times as much as it pays in dividends and has almost no debt.   The reason it is not a dividend machine is the base dividend is less than three percent.

Let's say you have to sell these shares that you bought for $57.03 for $62.50; in other words the person who bought the call exercises their right to buy the stock from you.   In that case you will have a gain of 11.029 percent on the combination of the call premium and the gain.

I continue to use stocks like QCOM to supplement my income and you should consider doing that as well.  When certain companies provide compelling ideas for income investors through covered calls, I will share them with you.

Very Truly Yours,


Dividend Machines for 2012 will start on January 2, 2012

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