January 25th, 2012 at 11:26 am
On Monday, 1/23/12, I sold 9 BAC Apr12 $9.00 Covered Calls for a net deposit of $93.18 in an IRA account. My basis for these BAC shares is now $15.87, excluding dividends received. This transaction represents a simple return of about .82% and an annualized return of about 3.34% on my prior basis.
S&P currently has a 12-month target of $8 for BAC, with a 3 star (Hold) rating. MarketEdge currently has a price opinion to $6.61 with a Long rating. The 24 Yahoo Analysts have a mean 12-month estimate of 2.5 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.
I increased my strike price this time up from my previous $7.50 that just expired. I decided to sell the $9 strike after watching BAC increase in price since mid December. I would have liked to sell a higher strike but did not want to go too far out. If BAC moves up to the $9 level I should be able to roll these Calls out and probably up before they expire.
BAC currently pays a paltry .01 quarterly dividend. It has paid a .64 quarterly dividend as recently as September 2008. I believe that BAC will eventually raise its dividend again. I don’t know if it will be back to the .64 level but certainly it should be well above what it is now. I continue to believe that BAC will be a strong winner for me one day, or maybe I should say someday in the future.
January 25th, 2012 at 10:06 am
On Monday, 1/23/12, I sold 7 DSX Sep12 $10.00 Covered Calls for a net deposit of $258.70 in 2 IRA accounts, 4 in one account and 3 in the other. My basis for these DSX shares is now $10.53 and $25.99 respectively, excluding dividends received. These transactions represent approximate simple and annual returns of 3.420% / 1.39% and 5.13% / 2.08% respectively.
The Calls that expired last week were for the $15 strike. This time I decided that DSX is not going anywhere for a while and that the $10 strike was probably a good bet with little risk of being called away. With few exceptions there has been resistance in the mid $8 range since last August.
I still don’t know where the dry bulk shippers are headed. The Baltic index was down yesterday, as I believe were the railroads. S&P does not currently have a 12-month price target and has no opinion on DSX. MarketEdge has a price opinion of $7.87 and a Neutral opinion. The 12 Yahoo Analysts have a 12-month price target of $10.21 and a recommendation of 2.6 in a scale where 1.0 is a Strong Buy and 5.0 is a Strong Sell. My thoughts about DSX have not changed since my last posting. I repeat below what I wrote then.
DSX last paid dividends in 4th quarter of 2008. It had been increasing its dividends each quarter with the last one being .95. I am hopeful and expect that dividends will resume as the world economy recovers. In the mean time I will continue to sell Covered Calls to “make my own dividend” .
To some degree I think DSX is an extension of Warren Buffet’s purchasing railroads. If the railroads are going to move coal, foreign steel and grains then there needs to be dry bulk shippers to move those same products across the oceans. That is what DSX does. I’m not sure if that comparison still applies but Buffet is in for the long term and perhaps in the long run DSX will recover.
January 25th, 2012 at 9:38 am
On Monday, 1/23/12, I sold 2 Mar12 $40.00 Covered Calls for a net income of $40.48. My basis for these VZ shares is now $34.86, excluding dividends received. This transaction represents a simple return of about .58% and an annualized return of about 3.90%.
VZ missed estimates by .01 when it reported yesterday. They also reported a 38% increase in contract wireless customers and a continued contraction of the traditional wire line business. VZ is down .31 as I write this.
S&P currently has a 12-month price target of $37 and a Hold recommendation for VZ. MarketEdge continues to have a Long rating and currently has a price opinion of $38.78. The 29 Yahoo analysts have a neutral rating (2.5 on a 5 point scale) and have increased their 1 year target average to $39.55.
I consider VZ to be a part of my core holdings and would like to own more of it but just don’t have the cash available to do so at this time. VZ pays a good dividend at about 5.34% on its current price. VZ currently pays a .50 dividend, up from .49 last July. This higher dividend resulted in a yield on my basis of 5.70% when last paid in November 2011.
