Tuesday, April 24, 2012

Can a foreign company qualify as an income investment?

Dear Income Investors,

Making income in this market continues to be a challenge.  Our 2011 dividend machines are producing greater than 4% yield but our 2012 dividend machines are producing about 3.8%.   We need to look for other opportunities to boost our income.

Today I am looking at an international company that does not qualify as a dividend machine but is an almost dividend machine with call option potential.   That company is TEVA Pharmacueticals (TEVA.)

TEVA earned $4.97 in its most recent fiscal year. The quarterly dividend is $.1972 which at today's price of about $45.73 is a yield of 1.72%.   The dividend has increased every year for 12 years and the D/E ratio of .6497.

You can sell a call on TEVA with a strike price of $50 and an expiration in June for $.30.  Here is how the income plays out.

Use the table below to determine if Teva is a good fit for you.   It provides income and diversification.

Very Truly Yours,


Strike Price $50.00
Cost Basis $45.73
Call Premium $0.30
Dividend $0.20
Gain in $ if assigned $4.57
Call Yield 0.60%
Gain Yield 9.14%
Total Gain Yield 9.53%

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