Sunday, January 12, 2014

Covered Calls on BMY & DOW Dividends & Income

January 6, 2014

Bristol- Meyers Squibb (BMY) is a company that has shown up on another author’s site as a potentially good stock for dividend investing. It is a pretty safe dividend stock with a D/E ratio of .4897.

BMY is not a Dividend Machine because it does not yield at least 3.5%. However, I have made a lot of income from a few stocks that pay less than the minimum yield to be a dividend machine, but enough of a dividend plus covered call income to create adequate income and even short term capital gain.

BMY is almost there and I am going to follow it. With a yield of 2.72%, BMY needs to create another two percent of income from covered calls to be a hold. I found a call that adds 2.58% to income and that may seem compelling but when you look at the dividend calendar, you will not get the dividend before the expiration date. 

Therefore, if you lose BMY to the call you will receive only the income from the covered call and a modest capital gain. The table below shows BMY may be worth a look for the short term and if you end up keeping it after the call expires, you will have a stock that has increased the dividend 3.125% over the past four years. It shouldn’t be a terrible investment either way.

January 9, 2014 An even better covered call on Dow.

January 7, 2014

Dow Chemical, DOW has some income opportunity. First, let me say that DOW is not a Dividend Machine but it is a good company.

Why Dow Is Not a Dividend Machine:

Dow pays only 2.94% and we are looking for 3.5% or above. Earnings exceed the dividend payout and that is good; and their D/E ratio is very solid at .7756. Therefore, if you are stuck with Dow, you are probably in a safe company. Another point of significance to income investors is their streak of seven quarters without a dividend increase.

How to make Income from Dow:

Covered calls on dividend stocks is one my three strategies to boost income from dividend stocks. The table below illustrates how to get a nifty 1.77% immediate yield from the call premium with a chance to snag an over 11% capital gain.

The Money Madam