Tuesday, September 3, 2013

Dividends & Income - How to Manage Microchip Technology - My Favorite Trade Today

Consider a smaller cap dividend company like Microchip Technology (MCHP) to provide diversification by company size and to juice your income.

Everybody is writing about Intel (INTC) and Qualcomm (QCOM) and IBM.  They suffer over the earnings, the slow growth, the future and of course the dividends.

These very large companies are good stocks to own but every income investor needs to be diversified by capitalization as well as industry.   The results of my work using my dividend machine strategy suggests that you can create a well diversified portfolio of dividend stocks using my four criteria and moreover, the smaller cap. companies perform quite well.

My Favorite Trade Today:

Image representing Microchip Technologies as d...
Image via CrunchBase
Today's I sold another call on Microchip Technology (MCHP.)  This was my favorite trade today. 

I have profiled MCHP as a dividend machine three times already.   The cost basis each time was $33.55 on November 14, 2010 (a 2011 dividend machine;)  $37.30 on February 8, 2012 (a 2012 dividend machine;) and $33.94 on February 7, 2013 (a 2013 dividend machine.)  

Clearly, MCHP has been up and down and that volatility has provided for very nice covered call income while I cash those ever increasing dividends.

MCHP Covered Call Analysis:

For the purpose of analysis, I will use the high basis of $37.30.    Today I sold a January $42 call for $1.00.    MCHP's all time high is $41.78.   I doubt that it will break out above $42 but someone else does and that is why they paid me $1.00 per share of additional income.   If I keep MCHP through to expiration, I will also receive their quarterly dividend in December.   See the table below to learn about the call  yield and the total gain opportunities.

Folks, this is how you work your dividend machines to maximize profit.

The Money Madam

Posts Related to MCHP as a Dividend Machine

November 14, 2010

February 8, 2012

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