I always struggle with stocks that I have loved over time but have increased in value to the point that I think I should sell to get more yield.
Remember, my concentration is on income. A low dividend yielding stock say under 3% that has prodigious capital gains is a tough sale. Intel, INTC, is one of those stocks.
Johnson and Johnson could be a similar stock except that JNJ has increased the dividend consistently over time. You have to go back 10 quarters to find a dividend increase at Intel. Therefore, in my book, INTC is ripe for covered call selling.
Today I sold this call:
My basis is lower than today's price of $37.10 but I would be willing to add at $37.10 just to make this trade. I get the call premium of $.45 per share and unless it is called away before the expiration date of March 20, 2015, I will also pocket the quarterly dividend of $.225.
This covered call's strike price is $40. This translates to an over 9% percent gain should my shares be called away. If I am stuck with INTC, I will still get my 2.46% dividend yield plus the call premium which turns my income into a minimum of 3.67% when you combine the dividend and call income. Later in the year, if I can sell another call I can boost my income even more.
Just sitting with INTC is not going to do it for this income investor. Consider selling covered calls to boost your income on dividend stocks that are less than 3% yielders and/or have not increased your income lately.