Thursday, June 26, 2014

Should you buy Freeport-McMoRan FCX for income?

With these credentials, it is hard to believe Freeport-McMoRan, symbol FCX, is not a Dividend Machine.

Earnings are $2.45 per year with a dividend payout of $1.25 for a yield of 3.49%.    Moreover, the dividend increases over the past 55 months average 23.6%.   FCX also carries a very manageable amount of debt; D/E (debt to equity ratio) is .9858.   The data are presented in the table below.

FCX Dividend Machine Fundamentals

FCX fails as a Dividend Machine

So what is the problem?   In 2009 during the period when major disruptions in all markets made stocks like Freeport to husband their cash,  FCX suspended the dividend only to resume it with vigor in 2010.  

Beginning in January 2010 with a quarterly dividend of $.15, FCX has paid a dividend every quarter and increased it to the current quarterly payout of $.3125.  And, FCX paid extra dividends of $1.00 in 2010; $.50 in 2011 and another $1.00 in 2013.

Income investors do not like to own a company that could cut the dividend.  Yet, we do like financial strong companies that share profit with us.

FCX Covered Calls to Boost Income

I own Freeport and I just may add some more.   The determining factor for me is to use covered calls to boost my current income from FCX above the 3.49% they payout in dividends.  I need more incentive than just the dividend to take the risk on FCX.

In the table below, you can review a call I used today to boost my income from FCX.

Proceed with caution but consider a stock like FCX for the income producing portion of your portfolio.