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 $4,497.84 in dividends in my various accounts for 2011.  My year to date average monthly dividends received is currently $749.64.  The year-to-date dividends currently represent about 25.89% of my average monthly investment cash flow and about 2.11% return on my current basis value.

My YTD dividends are up by $145.36 on a monthly average from last year.  That represents a 24.06% 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 June, I received notice of the following dividends paid in various accounts for a total of $1.025.17.  June has historically been one of the lower months for dividend payouts, at least in my portfolio, however it was a very good month this year.

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.

ANR completed its acquisition of MEE yesterday.  As a result of the acquisition I received 1.025 shares of ANR and $10 cash for each share of the 200 shares of MEE that I held.  The result was that I then owned 205 shares of ANR and my MEE Jul11 40 Covered Calls became ANR Jul11 40 Covered Calls with a deliverable of the ANR shares plus $1000 per contract.  I had previously decided to let MEE go in July and take my profits as my basis was about $12 under the strike price.  Now, with the additional cash payment as a result of the merger I had some more options.  In addition, I didn’t like the idea of having those adjusted Call contracts with the attached cash sitting in my account.  So, after doing a little research I discovered that I could perform the following transactions and pocket a little additional cash.

Today, 6/3/11, I BTC 2 ANR Jul11 40 Covered Calls and STO 2 ANR Jan13 40 Covered Calls for a net deposit of $476.91 in an IRA account.  My basis for these ANR shares is now 26.25, excluding dividends received.  These numbers provide a 8.33% simple yield and an annualized 5.10% yield on my basis.   

I used the basis for the MEE shares as my basis for the new ANR shares because then number of shares will be the same as far as the option contracts are concerned.  This is not a taxable account so there is no tax consequence of that decision.  It just made my accounting of things a little simpler.  After all, it was that initial investment that got me here.

To make these numbers I considered the $10 per share that I received as part of the cash received for the sale of the Jan13 40 Calls.  I was initially going to consider it as a dividend which is probably a better classification.  But, I did not want to burden the ANR basis with this transaction.  This will help me keep things in perspective.  I will sell the extra 5 ANR shares next week and book that income as dividend income.

It does not appear as if ANR pays a dividend so I anticipate that I will let it be called away in Jan 13.  Of course it may be that the Calls will expire worthless or that I can make a decent return by rolling out the Calls in Jan 13.  Time will tell.

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.