Many of the stocks that I own and write Covered Calls upon also pay dividends.  Dividends happen on a regular basis and add significantly to my annual investment income.

Today, I received the following dividends in an IRA account for a total of $192.00:

I use my basis per share, excluding dividends, 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 lower or higher than published yields for a stock.

Today, I sold 2 ACAS Aug09 5 Covered Calls for a net deposit of $10.49 in an IRA account.  My basis for these ACAS shares is now 23.55, excluding dividends received.

ACAS declared a dividend of 1.07 per share, payable on Aug 7.  Apparently the dividend was declared in order for the company to maintain its tax status as a regulated investment company and eliminate its income tax liability.  This is the company’s first dividend since Jan08.

The news is not good for ACAS.  It was removed from the S&P 500 in Feb09 and defaulted on $2.3 billion of unsecured credit arrangements on Mar 31.  Even with all of that, some analysts have raised their opinion on the company.  So, what to do?  I guess I am somewhat of a gambler so I am going to continue to hold onto ACAS for now, collect the dividends as they may appear and sell Covered Calls from time to time to decrease my basis and add to my cash flow.

Today I sold 2 AMD Oct09 5 Covered Calls for a net deposit of $42.49 in my taxable account.  My basis for these AMD shares is now 16.46.

I went out to Oct09 this time to be able to get a little extra premium.  I also sold the $5 strike price knowing that I may need to roll these calls out by October.  $5 has been a resistance level in the past though so I may be okay.  Time will tell.