My
husband is a growth investor and challenges me all the time to find a dividend
stock that could come close to meeting his growth goals. These are not easy stocks to find. But finally, I will relent and buy Apple
stock, AAPL.
AAPL
is not a Dividend Machine
In
2014 I use four criteria to pick stocks that I count on to pay my monthly
expenses. These stocks
have to provide
enough yield to meet today’s expenses but also must show a high probability
that they will increase my income to keep up with inflation. (Have you seen the price of hamburger
lately?) AAPL is a stock that still has
to prove itself on this very important Dividend Machine criteria.
Apple
has declared dividends in for the past eight quarters. Remember that APPL also paid a dividend in
1995 before it lost its mojo.
Apple
does not pay enough of a dividend, a 1.99% yield, to meet my ongoing
expenses. I need about 3.5% so that
rules out APPL on two criteria. The
yield is not high enough and their dividend growth history is not yet strong
enough.
On
the two other criteria, EPS must exceed dividends, and D/E ratio, AAPL passes
with flying colors. Take a look at the
table below to review Apple’s Dividend Machine criteria.
APPLE
is a good Income Stock
When
I find a stock like AAPL that seems to provide both growth and income but is
not quite a dividend machine, I look to covered calls to make up the income
difference. Covered calls do not
mitigate the risk that AAPL does not have enough dividend history to bet the
farm on but they can make up the income gap.
AAPL
Covered Calls are good and that is surprising to me. INTC and MSFT do not have very good calls
right now. The VIX, which measures
volatility, and is a glimpse into potential upside covered calls is still quite
low. But AAPL has an October call that
is worth a look. Going out 88 days also gives you the chance to
get the dividend in August and maybe even in October. The table below illustrates the income you
can make from a two difference covered calls on AAPL. One call expires in September and the other in October.
Consider
AAPL for the income producing portion of your portfolio.
TheMoneyMadam
