Today, 2/15/12, sold 3 FTR Jan14 $10 Covered Calls in an IRA account.  My basis for these FTR shares is now $8.54, excluding dividends received.  Selling the Covered Calls creates a simple return of about .76% and an annualized return of about .40% on my prior basis.

This is a rather odd transaction for me because of the length of time to expiration for the Covered Calls.  I have others that far out but only when I rolled out existing Covered Calls.  In this case I wanted to own the stock for the dividend (it pays about 18.07% at its currently depressed price of $4.15 as of this writing) but also wanted to capture some option premium to increase my return.  The stock does not have very rich premiums anyway and the current price was not near the next strike price so there was not much to do except go further out.  I had tried several times to sell these Calls at higher premiums and finally placed a good-till-canceled order at .10.  It was finally filled today.

S&P currently has a 12-month price target of $7.50 and a Hold rating.  MarketEdge currently has a more pessimistic price opinion of $4.31 and an Avoid rating on FTR.  The 15 Yahoo Analysts have a12-month price target of $6.20 and a recommendation of 2.6, down from 2.5 last week, where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

I note that Jim Cramer originally had negative comments about FTR back near October 2010 when I first acquired the stock.  Then the CEO of the company appeared on his show and appeared to calm Jim’s fears, in particular about the safety of the dividend.  Speaking of the dividend, FTR did reduce it when it acquired a unit from Verizon in order to help pay for the acquisition.  The CEO suggested that the dividend would be raised to prior levels of 25 cents per quarter from the current 18.75 cents, probably sometime in 2012.  We will see how accurate or honest the CEO is in the coming months.