Tuesday, June 9, 2015

Diebold, Selling calls to lock in gain

June 9, 2015

Diebold, symbol DBD, was a Dividend Machine in 2012.  See Link http://www.themoneymadam.com/2012/10/security-drives-dividends-for-october.html.   In 2012 DBD traded around $33.00.   Today it trades around $35.00 and sports a 3.26% dividend yield.  Why risk losing it with a covered call?

Selling calls to lock in gains

As I peruse my portfolio to determine if I can do better, I look at fundamental changes of every stock.  DBD is not a bad stock but it is no longer increasing the dividend as I would like.   Actually, increasing dividends is one of the most important factors I use to decide if I should rotate out of a stock into another.  Since I have a gain, and I would like more reliable dividend increases, I will sell a call and hope they take it.

With DBD, you can sell a July or August $40 call.  July will fetch about $.80 and August will fetch about $.90.    DBD's next ex-dividend date is expected to be August 20 and the call expires on August 21 so you may get the dividend with the August call but you will not with the July call.

The tables below present each of these calls.   Using my covered call calculator, you can see if this move is good for you.


Disclosure:  Long DBD with August $40 call