At this point, I am glad I did not just sell the 40 shares I owned last month.  I may be being a little greedy here but I am happy to need to roll out and up my Calls on C.  Rather than take a loss last month I am now in a position where I will actually make a capital gain if my C shares are called away.

S&P continues a 12-month target of $35 for C with a 3 star (Hold) rating.  MarketEdge currently has a price opinion of $30.87 and a Long rating, up from $26.31 with a Neutral rating last week.  The 22 Yahoo Analysts have a mean 12-month estimate of $40.77, up slightly from last week, and a mean recommendation of 2.3 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

C resumed dividend payouts in May 2011 at one cent per quarter.  Prior to that, it last paid a ten cent dividend in January 2009.  I am not considering C as a long term core stock but I still stand to make a reasonable profit just on the Covered Call premiums.

•  Increase my total cash flow from dividends and option premiums by a compound 8% from my base year of 2010
• Increase my dividend yield to 2.15% on my basis
• Increase my total cash flow to be 7.7% on my basis

 Here are the YTD results for 2012:

I include future YTD months simply because I find it interesting to see what the results might be if I never earned another dollar.  It also lets me see what I need to do to exceed last year’s results.  An explanation of some items in the results table seems appropriate.

• Target:  The monthly average amount to reach my 8% goal.
• Target +/-:  The dollar amount that I am ahead or behind my 8% goal.
• Average YTD increase %:  The average increase over last year-to-date.
• Yield on Mkt%: The yield on the market value of my stock holdings.

 Analysis of results:

 With only the one month in the books it is a little difficult to predict if the current results are what I might expect for the year or if they are an aberration.  They are certainly much higher than my goals and higher than my earlier expectations.

I am currently well ahead of my target average monthly cash flow for the year.  Both Option premiums and dividends contributed to the increase this month.  Option premiums were up 25.92% over the prior year.  Dividends received were up 3.58% over the prior year.  I expected the dividend increase but was not so confident about the option premiums.

Looking ahead, it appears that dividend income for December will be about twice what I received last year.  It appears that option income will be a little lower than February of last year.  My recent tactic of buying stocks and selling near the money weekly options may help increase the option income.  We will see how that turns out.

I expect that I will meet each of my goals again by the end of February.  The good January will help that even if February falls a little short.

My YTD dividends are up by $308.60 on a monthly average from last year.  That represents a 39.17% increase to date year over year.  I attribute the increased dividends to a few companies raising their dividends and to my purchasing additional dividend paying stocks.  During January, I received notice of the following dividends paid in various accounts for a total of $1.096.51.

Please notice that PGF is an ETF and pays dividends monthly.  The annualized dividend yield for PGF is based upon the simple and false assumption that it 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.

ANH, MFA and NLY are mortgage REITs that make their money on interest rate spreads.  Their current high annualized dividend yields on my basis are probably at risk when the Fed begins to raise its discount rates.  As of this writing, my current basis, excluding dividends, for some of these stocks is now below their current market price, which increases my yield on those stocks.  From time to time, I attempt to sell Covered Calls on these stocks to reduce my basis, which, to some extent, will help mitigate any possible future reduction in their dividend payouts.  I find myself just holding some of these 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, NLY, ANH and MFA fall into this category.

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.

I find this trade a little humorous because I did almost exactly the same thing one year ago.  The only real difference was that I then was rolling up from an Apr11 $16 strike to a Jan12 $17.50.  Of course, I rolled out an extra year this time.  Then, in Aug11, I actually rolled in and down to the Aug11, $13 strike and was able to sell monthly options through Dec11.  Maybe I will be able to do something similar again with these shares.

I made this trade today because AA is ex-dividend tomorrow and I was a little in the money on my prior Covered Calls.  I did not to take the chance that somebody would call my shares away because of the recent run up and to capture the dividend, regardless that it is only 3 cents per share.  I would probably have been okay but decided to go ahead and get the additional cash deposited today and increase my potential called deposit by an additional $1600.

AA has been moving up of late.  The 16 Yahoo Analysts have a mean 12-month price target of $11.40 with a mean recommendation this week (and last week) of 2.5 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.  S&P has a12-month price target of $13.00 with a Buy recommendation.  MarketEdge has a price opinion of $10.43 with a Long recommendation.

AA is one of those companies that reduced it dividend.  Back in February 2009 it paid 17 cents per share and has since reduced that dividend to 3 cents per share, including for the current quarter.  I look forward to the day when the dividend begins to recover.  In the meantime, I expect that I will continue to hold AA and collect the dividends such as they are and collect option premiums.

I acquired these shares by design by selling last weeks “weekly” Puts at the $31 strike.  However, WFC fell more than I anticipated last week making the Feb 3, 2012 weekly WFC $31 calls too cheap to generate a positive cash flow.  Even the Feb12 $31 Calls just barely created profits for my single lots.  Even so, I sold the Feb12 $31 Calls because my goal with these shares is to be back to cash as quickly as possible with a profit.  I rather expect that the Feb12 Calls will expire worthless and I will then be able to sell new calls, hopefully the weeklies.

S&P continues a 12-month price target of $33 with a Buy recommendation.  MarketEdge continues a price opinion of $26.07 and has a Long recommendation.  The 30 Yahoo Analysts have a 12-month price target of $34.28 and a recommendation of 2.1 on a scale where 1.0 is a Strong Buy and 5.0 is a Strong Sell.