Many of the stocks that I own and write Covered Calls upon also pay dividends.  Dividends occur on a regular basis and add significantly to my annual investment income.  Year to date I have received a total of $1.945.16 in dividends in my various accounts for 2011.  My year to date average monthly dividends received is currently $648.39.  The year-to-date dividends currently represent about 24.42% of my average monthly investment cash flow and about 2.04% return on my current basis value.

My YTD dividends are up by $44.11 on a monthly average from last year.  That represents a 7.30% 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.  Also, BP finally restarted its dividends although at half the pre-spill level.  During March, I received notice of the following dividends paid in various accounts for a total of $667.77. 

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.

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.

Many of the stocks that I own and write Covered Calls upon also pay dividends.  Dividends occur on a regular basis and add significantly to my annual investment income.  Year to date I have received a total of $7.251.31 in dividends in my various accounts for 2010.  My year to date average monthly dividends received is currently $604.28.  The year-to-date dividends currently represent about 27.75% of my monthly investment cash flow and 1.97% return on my current basis value.

Despite BP not paying a 3^rd or 4^th quarter dividend my YTD dividends are up by $32.27 on a monthly average from last year.  I attribute the increased dividends to a few companies raising their dividends, to my purchasing additional dividend paying stocks and very importantly to special dividends by FCX and VRX this month.  VRX has announced that they do not intend to continue paying dividends and the shares were called away from me so I will not be receiving that dividend again.   Normally I would have received an additional $420 in BP dividends in August and again in November.  BP is starting to talk about paying dividends again in 2011.  If that comes to pass I am hopeful that 2011 will have even better dividend performance.  During December, I received notice of the following dividends paid in various accounts for a total of $1,173.01. 

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.

 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.

On Wednesday, Oct 20, 2010, I BTC 2 IR Jan11 32.50 Covered Calls and STO 2 IR Jan12 35 Covered Calls for a net deposit of $136.93 in an IRA account.  My basis for these IR shares is now 47.89, excluding dividends received.  In addition to the increase in my strike price by $2.50 these transactions represent a simple return of about 1.41% and an annualized return of about 1.12% on my prior basis.

I last rolled out my IR Covered Calls in March 2010.  I was also able then to increase my strike price by $2.50.  I have been watching IR hoping that it would fall below my strike price but it doesn’t appear as if that will be the case.  I decided to go ahead and roll the Calls out now because I could do so at a net credit while increasing the strike price once again.

S&P currently has a 12 month price target of $41 for IR, up from a previous target of $40, and a Buy rating.  If they are right I will need to roll IR out again before Jan12 expiration.  With any luck I will be able to increase my strike price once again if that roll out becomes necessary.

IR pays a small .07 per quarter dividend which was about .58% annual yield on my basis prior to these transactions.  That is not stellar.  IR’s dividend was .18 per quarter as recently as May 2009.  Even at .18 IR’s dividend is not great.  Over time, unless called away sooner, my basis will decline as I continue to sell new Covered Calls and the dividend yield on my basis will improve.  The Call option premium will also increase my actual return on my investment in the stock