Today, 8/25/10, I sold 2 KFT Dec10 31 Covered Calls for a net deposit of $92.47 in an IRA account.  My basis for these KFT shares is now 28.40, excluding dividends received.

S&P continues to have a 12 month target of $30 for KFT.  MarketEdge has a price opinion of 30.48 for KFT.  KFT has had a 52 week high of 31.09 and a low of 25.72.  It seems to have a lot of resistance near 31.  Actually, my last two of my last 3 Calls were written at 30 and expired worthless in Dec09 and Jun10.  My most recent Call was written at 31 and expired in August.

It helps that I am in the money on KFT and am now okay if it gets called away at this strike.  However, I would probably try to continue to own the stock to be able to continue collecting the dividends and option premiums.

I originally acquired KFT as a spin off from MO back in 2007.  Since 2009 I have received $406 in total dividends or $2.03 per share in total.  My records do not currently reflect any dividends I may have received prior to 2009.  The dividends are a little more than a 4% annualized yield on my option reduced basis.  Couple the dividends with the option premiums I collect and I am happy to continue owning KFT.

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 $3,856.15 in dividends in my various accounts for 2010.  My year to date average monthly dividends received is currently $550.88.  These dividends represent 26.35% of my monthly investment cash flow and 1.80% return on my current basis value.

During July, I received notice of the following dividends paid in various accounts for a total of $321.92:

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.

Yesterday, 6/22/10, I STO 2 KFT Aug10 31 Covered Calls for a net deposit of $62.46 in an IRA account.  My basis for these KFT shares is now 28.86, excluding dividends received.

S&P has a 12 month target of $30 for KFT.  That was pretty brave of them as KFT was selling at $30 when they formed their opinion on June 19.  KFT has had a 52 week high of 31.09 and a low of 24.16.  It seems to have a lot of resistance near 31.  Actually, my last two Calls were written at 30 and expired worthless in Dec09 and Jun10, although the Jun10 expiration was a squeaker.  Here is what I wrote yesterday regarding that:

I had expected that my KFT Jun 30 would result in my KFT shares being called away because KFT closed Friday at 30.01.  I had understood that if the stock was 1 cent in the money it would automatically be called.  After about an hour on the phone or waiting for a call back from E*Trade it turns out that whoever was on the other side of the deal had entered a do not execute order which arbitrarily allowed me to keep the stock.  I would have been happy either way.  If I had been called away I would have sold July or August 30 Puts on KFT.  Since I still own it, I will now receive the dividend to be paid early in July and will also sell new Covered Calls on it.

So, now I have written new Covered Calls and at a one dollar higher strike and at a nearer expiration month than I have been able to do for awhile.  It helps that I am in the money on the stock and am okay if it gets called away at this strike.  As I wrote yesterday, I would probably sell Puts on KFT if it gets called away in August.

I originally acquired KFT as a spin off from MO back in 2007.  Since 2009 then I have received $348 in total dividends or $1.74 per share in total.  My records do not currently reflect any dividends I may have received prior to 2009.  The dividends are about a 4% annualized yield on my option reduced basis.  Couple the dividends with the option premiums I collect and I am happy to continue owning KFT.