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.

Last Friday, 3/11/11, I sold BTC 6 NYX Mar11 31 Covered Calls and STO 6 Jana13 35 Covered Calls for a net deposit of $316.79 in an IRA account.  My basis for these NYX shares is now 66.01, excluding dividends received.  This transaction represents a simple return of about .79% and an annualized return of about .43% on my prior basis.  If held to term and called away this transaction represents a simple return of about 6.81% and an annualized return of about 3.65% on my prior basis.

When I originally sold the Mar11 31 Calls I thought I might need to roll them out and possible up even though 30 or 31 have been pretty good strike prices for me in the past couple of years.  Then there came the announcement that NYX would be “merged” with the German exchange.  If approved by the regulators on both sides of the Atlantic, shareholders of NYX will receive .47 share of the Deutsche Börse (DBOEF) for each NYX share.  At today’s price of 74.11 for DBOEF, that places a value of about 34.83 per NYX share, well below my basis.  My goal with this transaction was to minimize my potential loss by increasing the strike price and to help make sure that I collect the current NYX dividend which is ex-dividend today, 3/14/11.

I don’t think the “merger” with the Germans is a done deal just yet.  There are still the regulatory hurdles to overcome and I see just today that there are potentially others that may yet bid for NYX.  NYX has been drifting down for several days but is up today, apparently on the expectation of a bidding war.  I do expect that somebody will eventually win a bid for NYX and that I will end up losing money on the deal.  Therefore, if I still own NYX when the Jan14 LEAPs are available I will look to roll out and, hopefully, up the Jan13 35 Covered Calls.

S&P currently has a 12 month target of $38 and a hold rating for NYX.  MarketEdge currently has a price opinion of $38.11 a rating of Long.  The YHOO! Analysts have an average 12 month price target of $39.  The general opinion of the various analysts that I can see is primarily a buy opinion.

Even though I am well underwater on NYX I rather like it.  The stock has a .30 quarterly dividend which equals about 3.38% at the current price.  My return on basis is lower of course at about 1.80% as of the last payout in September.  On the plus side my return on basis continues to increase as the basis falls as a result of option premiums.

Today, 1/25/11, I sold 2 NYX Mar11 30 Puts for a net deposit of $126.47 in an IRA account.  I am considering this an extension or a continuation in the series of the Puts that expired in January, although these have a strike of 30 while previous Puts had a strike of 29.  My basis for these NYX shares would now be 27.74 if Put to me.  This transaction represents a simple return of about 2.10% and an annualized return of about 9.72% on my potential basis.

S&P continues to have a 12 month target of $34 and has a hold rating for NYX.  MarketEdge continues its price opinion to $28.81 its rating of Neutral.  The general opinion of the various analysts that I can see is primarily a hold opinion.  NYX has been in a trading channel from the mid 20’s to just over 30 for several months now with a spike up to almost 35 last April.

I sold Calls on 600 other shares I own for Mar11 with a 31 strike price.  Unless NYX continues to fall I will be rolling out the Mar11 Calls.  I would not mind owning more NYX and if Put to me at this price these shares would certainly help reduce my average basis.   It would be convenient if an assignment occurs in March so I could sell new Covered Calls on the combined holding.

NYX pays a decent dividend on its current market price of about 3.72%.  The basis on the shares I currently own is high enough that my return is only about 1.80% at the last payout in December 2010.