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.  Year to date I have received a total of $2,781.34 in dividends in my various accounts for 2010.  My year to date average monthly dividends received is currently $556.27.

I received notice of the following dividends paid in various IRA accounts for a total of $379.71:

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.

NLY is a mortgage REIT that makes its money on interest rate spreads.  Its current annualized dividend at 14.93% on my basis is probably at risk when the Fed begins to raise its discount rates.  As of this writing, my current basis, excluding dividends, for NLY is above its market price of $16.25.  I sell Covered Calls on NLY to reduce my basis which, to some extent, will help mitigate any future reduction in NLY’s dividend payout.

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 be lower or higher than published yields for a stock.