Today, 9/2711, I BTC 2 KFT Jan12 32 Covered Calls and STO 2 KFT Jan13 30 Covered Calls for a net deposit of $496.95 in an IRA account.  My basis for these KFT shares is now 25.27, excluding dividends received.  These transactions represent a simple return of about 8.95% and an annualized return of about 6.71%. 

KFT goes ex-dividend on September 28 which and  I wanted to help ensure that I would not be called away at this time for the dividends.  KFT is trading five dollars above my strike price but it has been my experience that the further out the option expiration date is the less likely that the option will be exercised.  I really wanted to roll the strike price up but could not do so for a net deposit in the transaction.  I would have even liked to keep the strike at the same level but the $32 strike is not available for January 2013.  I intend to see if I do so when Jan14 Leaps are posted.  Hopefully I can roll up to the Jan14 35 strike for another net deposit.

Even though I rolled the strike price down with this transaction, I stand to gain about an additional $90 if called away because the reduction in the strike price is less than the net deposit I earned by the roll out.  That is what really tipped me toward making this transaction rather than just rolling out to the March 2012 $32 strike.

S&P has raised its 12 month target to $36 from $34 for KFT and continues its Hold rating on it.  MarketEdge has increased its price opinion to 34.87 from 31.67 for KFT and now has a Neutral rating on it.  The 17 Yahoo analysts have an average 12 month price target of $39.12 and a recommendation of 1.9 where 5.0 is a Strong Buy and 1.0 is a Strong Sell.

It helps that I am in the money on KFT and am really okay if it gets called away at this strike.  However, as I suggested above, I will probably try to continue to roll the stock out so as to maintain ownership and 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 $638 in total dividends or $2.90 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.

Today, 6/9/11, I BTC 2 KFT Jun11 32 Covered Calls and STO 2 KFT Jan12 32 Covered Calls for a net deposit of $88.96 in an IRA account.  My basis for these KFT shares is now 27.76, excluding dividends received.  These transactions represent a simple return of about 1.57% and an annualized return of about 2.54%.  Neither the dollar amount nor the percentage returns are great but I was able to reduce my basis by 45 cents and hopefully continue owning the stock to capture future dividends.

KFT goes ex-dividend on June 28 which is after the current options expire but I wanted to help ensure that I would not be called away at this time for the dividends.  KFT is still trading two dollars above my strike price but it has been my experience that the further out the option expiration date is the less likely that the option will be exercised.  I really wanted to roll the strike price up but could not do so for a net deposit in the transaction.  I intend to see if I do so when Jan14 Leaps are posted in a few weeks.  Hopefully I can roll up to the Jan14 35 strike for another net deposit.

S&P has raised its 12 month target to $34 from $32 for KFT and continues its Hold rating on it.  MarketEdge has increased its price opinion to 31.67 from 30.36 for KFT and continues its Long rating on it.  KFT now has a 52 week high of 35.44 and a low of 27.59, slightly up from my last writing in November 2011.

It helps that I am in the money on KFT and am really okay if it gets called away at this strike.  However, as I suggested above, I will probably try to continue to roll the stock out so as to maintain ownership and 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 $580 in total dividends or $2.90 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 $3,123.51 in dividends in my various accounts for 2011.  My year to date average monthly dividends received is currently $780.88.  The year-to-date dividends currently represent about 30.15% of my average monthly investment cash flow and about 2.44% return on my current basis value.

My YTD dividends are up by $176.60 on a monthly average from last year.  That represents a 29.23% 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.  During April, I received notice of the following dividends paid in various accounts for a total of $1,178.35. 

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.

ANH, MFA and NLY are mortgage REITs that make their money on interest rate spreads.  Their current high annualized dividend yields on my basis are probably at risk when the Fed begins to raise its discount rates.  As of this writing, my current basis, excluding dividends, for many of these stocks is now below their current market price which increases my yield on those stocks.  I attempt to sell Covered Calls on these stocks to reduce my basis which, to some extent, will help mitigate any possible future reduction in their dividend payouts.  I find myself just holding some of these stocks sometimes while I wait for their price to rise to a point that I am comfortable selling new Covered Calls.  If I do not sell new Covered Calls I am content to capture the nice dividend for an indefinite period.  Notably, PGF, NLY, ANH and MFA fall into this category.

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.