Most of the stocks that I own and write Covered Calls upon also pay dividends. Dividends occur on a regular basis and add significantly to my annual investment income. Year to date I have received a total of $13,046.78 in dividends in my various accounts. My year to date average monthly dividends received is now $1,186.07.
The year-to-date dividends currently represent about 51.16% of my average monthly investment cash flow and about 2.51% return on my current basis value. I still believe the current percentage is an anomaly and is a result of a reduced positive cash flow from options. The amount of funds tied up in longer-term option contracts reduces monthly option cash flow. With that said, I believe that next year I will begin to shift my emphasis to dividend collection and reduce the emphasis on option income. That will have the effect of increasing the percentage of dividends comprising my average monthly cash flow.
My YTD dividends are down by $299.28 on a monthly average from last year, virtually unchanged from last month. That represents a 22.68% decrease to date year over year. All of the decrease is due to LNCO suspending its monthly dividend. The result is a reduction of about $507 per month in my dividend cash flow. Given that, being down only $299.28 seems like a win. In the most recent month, I received notice of the following dividends paid in various accounts for a total of $630.00.
Please notice that several stocks pay monthly dividends and are identified with a 12 in the Dividends per Year column. The annualized dividend yield for the monthly dividend payers is based upon the simple and generally false assumption that they will pay the same dividend each month for the next 12 months. The actual annualized dividend yield may be more or less than illustrated here.
I started using a new strategy for dividends several months ago. I subscribe to Dividends.Com. One of the items in their daily email is a listing of some stocks going ex-dividend the next day. I use that list to buy stocks to capture additional dividends. I also sell Covered Calls on the stock at a strike near the purchase price for the next expiration date. Sometimes I make a little on the stock, sometimes I lose a little on the stock. These stocks are identified with a green background on the stock symbol. However, I make money on the total set of transactions. I have run into a snag with this strategy. I still own several of these stocks. I can’t seem to get them called away as I expected. However, I keep trying and making more option premiums and sometimes more dividends.
I am just holding some stocks while I wait for their price to rise to a point that I am comfortable selling new Covered Calls. If I do not sell new Covered Calls I am content to capture the nice dividend for an indefinite period. Notably, PGF, ANH and MFA fall into this category. I am also holding shares of PGH, LNCO, and NLY without writing Covered Calls on them as I wait for the opportunity to sell new contracts at my desired strike prices.
I use my basis per share to determine the simple and annualized percentage return because I feel that it gives me a better representation of the value of the dividends as they relate to my portfolio. My basis may be above or below the market price which causes my return to be lower or higher than published yields for a stock. I calculate my basis per share as my acquisition price less any option premiums received on those shares. I do not use dividends to reduce my basis.
Here is a chart of my Monthly Average Dividends received by year beginning in 2009. I was not tracking the dividends prior to 2009.
