Friday, October 31, 2014

CVX Covered Call for Cash

Earlier this week when Chevron, symbol CVX, and the other oils tanked, I added to my position at about $115.    Today I will sell a call on that purchase.

A January 2015 $120 covered call will provide a boost to my income.   See the analysis below.  Note that in addition to the covered call premium of a mighty $2.25 I will also pocket the dividend of $1.07 provided I still own CVX on the next expected ex-dividend date of Nov. 15, 2014.


Dividend Machine CVX

Chevron profit rises on refining strength $CVX
This is why you own the best of the group. Good yield,  Dividend growth, earnings even in an oil glut because of diversification.   MM

Thursday, October 30, 2014

WPZ raises dividend

Williams' Q3 misses Q3 earnings, expects ~15% annual dividend growth $WMB, $ACMP, $WPZ

Williams Partners has been a difficult holding.  But they raised the dividend again so I will hold a while longer.  TheMoneyMadam

COP gas that income

ConocoPhillips Q3 earnings rise on higher production $COP

Wednesday, October 29, 2014

Progressive Dividend Policy BHP Billiton $BHP

I love it when I look at a stock's website and am greeted with the mission of a progressive dividend policy.   I am looking for more than 4% dividend yield, I am looking for dividend growth and I am looking to find a bargain.   But I am not greedy so I will buy this stock and sell a call that allows me to pocket both the covered call premium and the expected next dividend.  

You will notice that this opportunity was even better a couple of weeks ago but I am adding more.   (

BHP Billiton:   Covered Call Fundamentals

Do not pay attention to the QE or even the volatile swings in the market.  Just look for stocks that meet our criteria and figure 90 percent of them will do well.  


Sunday, October 26, 2014

New Dividend Machine for 2014

When you visit the Wilbur D May museum in Nevada, you learn that this very successful man sold his stocks just before the crash of 1929 not because he was prescient, but  because he was going on an extended trip and that it was a prudent move.  As the story is told, he bought back at 10 cents on the dollar.

This story shows that luck is a big factor in selling high and buying low.  The rest of us have to use discipline to build our income producing portfolios.   Good luck may yield a greater gain for the lucky few, but discipline provides steady and increasing income for the rest of us.

Discipline drives the 2014 Dividend Machine Criteria

With that in mind, let me remind you that we are searching for stocks that yield at least 3.5%.   These stocks must have increased the dividend at least 4% per year over the past five years and they should earn more than they pay out and have a debt to equity ratio less than 1 or within industry standards.

McDonald's, symbol MCD, is just such a stock.  MCD meets all four criteria for inclusion into the 2014 Dividend Machine portfolio.

MCD was a 2012 Dividend Machine

MCD was a Dividend Machine before. In October of 2012 MCD met that year's Dividend Machine criteria.

Price has increased 5% and dividends have increased 5.2% since that post.   These are good results for an income investor.  MCD's 2014 Dividend Machine fundamentals are presented in the table below.

Consider McDonald's, symbol MCD, for the income producing portion of your portfolio.


Sunday, October 19, 2014


Gone Fishin'  

I will be back on Monday, 10/27/2014.


Thursday, October 16, 2014

Do you believe in Liquified Natural Gas? GLNG

Golar, symbol GLNG has been a very good trade for me.   I only trade for income and this is a high risk trade.   Total return if the call works is over 16%.   Immediate yield on the call premium along is 10%.

I believe in liquified natural gas so here is a summary of a trade I made today.


Wednesday, October 15, 2014

2012 Dividend Machines versus SDY and VIG

If I were a young man, or woman, I would really consider using a combination of ETF's to save for the future.  Some young people have the time to invest for themselves and others do not.  Some of those who do not have the time use an adviser and do well and others do not.    Advisers are expensive and if you want to save for retirement income I think, as does Ben Stein, that low cost ETF's are the way to go.   

Dividend Machines

Once you get closer to retirement and contemplate replacing your paycheck with investment income,  I would learn how to invest in stocks like Dividend Machines to improve income potential later in life.  This post looks at these three potential investments using my data from 2012.


I am impressed that SDY and VIG, two of the best Dividend Income, low cost exchange traded funds are keeping up with Dividend Machine stocks.

This post presents a comparison of 2012 portfolios.   If you had bought 100 shares of all the stocks profiled in this blog as 2012 Dividend Machines, you would have invested about $213,00.    The results of that effort are presented below.

Also presented in the table below are the results of your investing that same amount of money, $213,000. in SDY and VIG low cost ETF's.   

I want to make it clear that if you look up the performance of these two ETF's the returns will not match the data in the table below.   You see that a mutual or ETF's performance as reported on financial sites assumes you invested the whole $213,000 on day one.    I evaluate performance differently. 

I compare the results of your investing the same amount of money in one of these ETF's that you would have invested in a stock that I profiled. 

For instance, if you bought 100 shares of INTC at $28 you would have invested $2,800.  If you invested that same amount of money and bought VIG at $65 per share instead of the INTC you would have invested $2,800 and bought about 43 shares of VIG.   If it were SDY and the price was $66 your would have bought about 42.42 shares of SDY.

In 2012 at the end of the year you would have owned 100 shares of 48 Dividend Machine stocks, or 3,709.428 shares of VIG or 3,796.901 shares of SDY.   The table below compares how your investment performed using capital gain, yield on current value and yield on basis.

You can see that to grow wealth, all three strategies are similar.  But for income, Dividend Machine stocks remain superior.


DRI Boring Safe Incime

Vote-counting time at Darden Restaurants $DRI

Long CVX

Time To Consider High-Yielding Chevron? $CVX

Sunday, October 12, 2014

What to do with Microchip Technology MCHP?

One of my earliest Dividend machines took a terrible tumble on Friday.   The tumble was deserved. Although I do not use P/E (price earnings) ratios to determine if a stock qualifies as a Dividend Machine, P/E is important when you try to decide what to do with a holding that crashes like MCHP did on Friday.

Microchip's P/E soared over the past few years and this was during a time when MCHP was absorbing an acquisition.  I was tempted to sell it because the yield on this inflated stock price was well below what I could get from another stock.    On the other hand, my cost basis of $33.69 is well below the current price.

During these times when traders buy stocks that are rumored to be have a lot of growth, MCHP had good rumors and a high stock price and a high P/E.    Covered calls are the obvious strategy to improve income but you can only sell a call when someone else wants to buy it from you.   For quite a while, MCHP had no calls.   Lately calls have been better and I have one half of my position on call (October $50.)  That means I could not sell those shares if I wanted to until the calls expire.

Does a lower P/E mean I should buy?

I will likely hold onto the other shares as this stock is still a strong income producer.  Unless covered call income is compelling, which to me is a call premium yield of at least 2% or about $.80 per contract, I will not add to my position.

Even if the stock price erodes enough that MCHP's dividend yield is more than 3.5% and the P/E is less, I will not add.  My reason is I need dividend growth and while MCHP has consistently increased the dividend, the increases have been meager.     But then I get the capital gain if the call buyer takes part of my position and that makes up for the meager dividend increases.   But I really doubt that my stock will be called away.   Therefore, I will look for new calls and hold.

A stock with a 3.1% dividend yield, low debt, a history of increasing dividends, and earnings that exceed the dividend payment, and has occaisional covered call income, is not a bad stock to hold.


Thursday, October 9, 2014

Dividends and Income Ideas in a Down Market

Is FCX a buy?

Here's The Best Way To Invest In Gold, And It's Not What Investors Might Expect $FCX, $ABX, $APA, $NEM

COP for dividends and income

ConocoPhillips: A Solid 4% Yield Now On Sale $COP, $PSX

Wednesday, October 8, 2014

BHP Billiton covered call for more income

BHP Billiton, symbol BHP, is an often unloved stocks.  It is a limited partnership that has to pay our all its earnings.  This makes evaluating BHP’s fundamentals a little more difficult than your basic corporation.  Using MSN’s investing information site, you can dig into the financials to learn that BHP makes a nice amount of money to fund their dividend payout.  

BHP is a resources company and demand and utilization of resources varies substantially which is why earnings and stock price can vary all over the place.

BHP Billiton pays dividends twice a year.   This year their yield is over 4%.   I am long BHP and underwater.   I will add to my position today at about $57.75 and will sell January $62.50 call for a $1.10 per contract.   A contract is equal to 100 shares.

Take a look at the covered call table below for an analysis of this trade.