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 $3,472.67 in dividends in my various accounts for 2011. My year to date average monthly dividends received is currently $694.53. The year-to-date dividends currently represent about 27.79% of my average monthly investment cash flow and about 2.03% return on my current basis value.

My YTD dividends are up by $90.26 on a monthly average from last year. That represents a 14.94% 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 May, I received notice of the following dividends paid in various accounts for a total of $349.16. May is typically one of the lower months for dividend payouts, at least in my portfolio.

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.

Today, 4/5/11, I BTC 2 VZ May 38 Covered Calls and STO 2 VZ Jan12 40 Covered Calls for a net deposit of 80.95 in an IRA account.  My basis for these VZ shares is now 35.06, excluding dividends received.  These transactions yield about a 1.14% simple return and about a 1.43% annualized return on my prior basis.  If called away at the new strike price my simple return would be about 6.78% and an annualized return of about 8.50% on my prior basis.

With VZ trading above my strike price and going ex-dividend tomorrow I wanted to make sure that these VZ shares would not be called away so somebody could collect the dividend as has happened to me in the past.  I was pleased to be able to do the roll out and at the same time increase my strike price by $2.  Now I am also pretty much assured of collecting the current dividend of $97.40 early in May.

S&P has a 12 month price target of $34, up from $32 when I last checked, while continuing its hold recommendation for VZ.  MarketEdge has a reduced it’s rating to Neutral from Long and has increased its price opinion to $37.29 from an earlier $29.06.  The Yahoo Analysts have a 12 month price target of $37.54 and have increased their recommendation to 2.4 from 2.5 last week where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

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 5.08% on its current price and 3.76% on my basis for the next payout in May.

Today, 1/25/11, I sold 2 May11 38 Covered Calls at a net income of $114.47.  My basis for these VZ shares is now 35.47.  This is a strike increase of $1 from my last Calls that expired in Jan11.  These transactions represent a simple return of about 1.59% and an annualized return of about 4.08%. 

I like VZ and think that its prospects look good for the future, especially not that they will be selling the iPhone.  I did read though that their wireless growth has begun to flatten.  I also read that they will be offering a flat rate $30 per month for data which appears, at least to me, to be a good marketing ploy to steal some of the iPhone market share from AT&T.  VZ is up today so somebody must think well of them even though they missed estimates by .01.

S&P continues to have a 12 month price target of $32 but has reduced its recommendation to a Sell from a Hold for VZ.  MarketEdge continues to have a Long rating and its price opinion of 34.64.  Yahoo! Finance analysts have a neutral rating (2.5 on a 5 point scale) and have increased their 1 year target average to 34.93 from 33.40.

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 5.40% on its current price.  Even better, VZ raised its dividend this quarter by 1.25 cents to .4875 cents from .475 cents in the prior quarter.  This higher dividend resulted in a return on my basis of 6.96% when last paid in November 2010.