On 8/31/09, I sold 2 ACAS Jan10 5 Covered Calls for a net deposit of $18.49 in an IRA account.  My basis for these ACAS shares is now 23.46, excluding dividends received.

At this point, ACAS is a pure speculative play for me.  If (did I say if..I mean when) the economy revives ACAS should do okay.  Otherwise, I may lose it all or just bump along down here picking up some option premium about twice a year and an occasional dividend.  Speaking of dividends, the last one paid in early August.  It was valued at $1.07 per share and was split between cash and additional stock.  I received 37.04 in cash and 176.96 in additional stock.  I keep meaning to sell the extra stock but just haven’t gotten around to it yet.

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.

Yesterday I received the following dividends in an IRA account for a total of $214.00:

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 be lower or higher than published yields for a stock.

This dividend is a little unusual in that it was a cash payout and a stock payout.  ACAS solicited desires as to whether stockholders wanted a cash payout or a stock payout.  They then did a proration of cash and stock apparently taking into account the desires of the various stockholders.  My preference was all cash.  What actually happened was that I received the $37.04 as a cash dividend and the $176.96 as a stock dividend.  The stock dividend translates into an additional 54.9586 shares of ACAS.  ACAS is trading at about 3.08 at this writing so the current value of my new shares is about 169.27. 

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.