M* Money Madam : Boost your yield on CVX to over four percent this year!

Monday, June 25, 2012

Boost your yield on CVX to over four percent this year!

Chevron (CVX) Dividend Machine for week of June 25, 2012

Chevron, symbol CVX, is a wonderful dividend machine. Just look at the fundamentals presented below to see how CVX performs on our four key dividend machine criteria. Earnings over the past four quarters have been a robust $13.62 per share; paid dividends were $3.30 per share. At today’s stock price of about $98.90 the dividend yield is 3.64%. CVX just raised the quarterly dividend from $.81 per share to $.90 per share. CVX has raised the dividend every year for 19 years; moreover, this company performs like this with only a 3% D/E ratio.

CHEVRON Fundamentals

Price when profiled	$98.90
Last 4 Qtrs Earnings	$13.62
Last 4 Qtrs Dividend	$3.30
Current Dividend Yld	3.64
No. of Years increased	19
Debt/Equity ratio	3.00%

Chevron is one of my favorite dividend machines because the stock is volatile enough that covered call income is often available. If you wrote a September 22, 2012 call with a strike price of $110 your income from the call would be $.54 a share. That call income adds over one half of a percent to the 3.64% dividend yield. This boosts your income from Chevron to over 4% for 2012. With Chevron’s stock price being so volatile, you just might sell the stock to the call buyer for a nifty 11.77% gain or you might keep it and write another call later in the year.

CALL OPTION CVX

Cost Basis	$98.90
Strike Price	$110.00
Call Premium	$0.54
Dividend

Gain in $ if assigned	$11.64
Call Yield	0.55%
Gain Yield	11.77%

If the buyer of your call does not take your stock before the expiration date of September 22, 2012, you should also receive the quarterly dividend of $.90. The return looks even sweeter as is noted in the table below.

CALL OPTION CVX

Cost Basis	$98.90
Strike Price	$110.00
Call Premium	$0.54
Dividend	$0.90

Gain in $ if assigned	$12.54
Call Yield	0.55%
Gain Yield	12.68%