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2 Dividend Stocks With High Yielding Covered Calls

ByDouble Dividend Stocks
Published 03/06/2013, 04:19 AM
Updated 07/09/2023, 06:31 AM
CMI
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BIG
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CMII
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OPIN
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CLMT
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IFNC
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ECL
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OPTIO
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There are 2 dividend stocks in our Covered Calls Table, that currently have interesting high options yields on out of the money strike prices:

Calumet Specialty Products Partners LP, (CLMT), and Cummins, (CMI).

Dividends: Both of these stocks have ex-dividend dates in May, prior to their May options expiration date of May 17, 2013 market close. CLMT, with its nearly 7% dividend yield, is listed in the Energy section of our High Dividend Stocks By Sector Tables.
CLMT-DIV
Both stocks have covered call trades which expire on the May 17, 2013 market close, after their May ex-dividend dates. CMI’s May $120.00 call option outpays its May dividend by over 11 times:
CLMT-CMI-CALLS
Covered Call Profitability/Income Scenarios: Both stocks have covered call trades with strike prices far enough above their share prices, that you can still earn good income, even if the shares get assigned/sold away prior to the option expiration date. For example, the Potential Assigned Price Gain for CLMT is $1.37, ($40.00 strike price minus $38.63 share cost), vs. its $.65 May dividend:
CLMT Potential Assigned Price Gain Share Performance: Both stocks have had big price gains over the past year, and have institutional support. CLMT has outperformed the market substantially so far in 2013:

Share Performance Financials: Both stocks have financial ratios above their industry averages, excepting CLMT’s debt load, which is higher than the .13 industry average. CLMT has an Interest Coverage ratio of 1.64.

FinancialsDisclaimer: This article was written for informational purposes only and is not intended as investment advice.

Disclosure: The author was short CMI puts at the time of this writing.

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