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.  For example, I received a total of $6,864.10 in dividends in my various accounts for 2009.

I have received notice of the following dividends paid in my Taxable account and various IRA accounts for a total of $251.36:

Dividends Received

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.

Yesterday, 1/4/10, I BTC 2 MEE Jan10 34 Covered Calls and STO 2 MEE Jul10 35 Covered Calls for a net deposit of $206.90 in an IRA account.  My basis for these MEE shares is now 31.27, excluding dividends received.

MEE pays a small .06 per quarter dividend, up from .05 per quarter in most of 2008.  The current dividend is about a .52% annual yield on the current market price or about .74% annual yield on my basis.

Because MEE does pay a dividend it does generally meet my investing objectives.  On the other hand, the yield is pretty low.  What mitigates the low yield is the option premium I am able to realize.  In the case of this transaction with the additional option premium and the increase in strike price my return is better than 21% which is addition to the dividends.

Today I BTC 2 MEE Oct09 30 Covered Calls and STO 2 MEE Jan10 34 Covered Calls for a net deposit of $136.98 in an IRA account.  My basis for these MEE shares is now 32.31, excluding dividends received.

I not only rolled out, I rolled up $4 on the strike price and did it all with for a net deposit rather than a net debit as I had to do when I rolled out and up to the Oct09 30 strike from the Jun09 25 strike early in June.

I don’t know if MEE is just rising with the rest of the market.  It has been rolling between about 24 and 34 since early Aug09 after rising from about $17.  I see that the sector in general and MEE in particular were lowered to neutral late in September but that should have held MEE back, not moved it higher.  MEE did acquire 23 million additional coal reserves from the bankrupt Appalachian Fuels which was announced on Sept 30.

It feels good again to have Covered Calls at a higher strike price than my basis on the underlying stock.  That is happening more often these days but not always, unfortunately.