Invest in These 5 Stocks From The Dow Jones list With Covered Calls and Collect Dividend

Updated: 14 October, 2021 seen 158

One of my preferred investing strategies is investing in stocks from The Dogs of The Dow List.  Currently (2021), these are the Small Dogs of The Dow stocks: DOW, VZ, WBA, CSCO, and KO.

In 2021 PFE was replaced by VZ in the Small Dogs list. 

In today's article, I will take a quick glimpse at a potential return from investing in these five stocks with options (covered calls) + collecting the dividend during the road.

For this example, I'm going to virtually buy 100 shares at each company. All prices below are listed as of October 8, 2021

Ticker Price Shares value Div Yearly Dividend Monthly Options
DOW $58.71 100 $5,871.00 4.77% $280.00 $219.00
VZ $53.24 100 $5,324.00 4.81% $256.00 $65.00
WBA $47.38 100 $4,738.00 4.03% $191.00 $154.00
CSCO $55.08 100 $5,508.00 2.69% $148.00 $90.00
KO $54.12 100 $5,412.00 3.10% $168.00 $73.00
      $26,853.00   $1,043.00 $601.00

Data source: Google Finance, Dividend.com, and finance.yahoo.com (Stock and options prices as of October 8, 2021, options expiry November 12, 2021)

From the dividend investing perspective, these stocks look quite awesome. We might get a bit more than $1,000 USD in one year just in form of dividends. The dividend income though is before tax, so take out at least 15%. Still quite good income, for doing nothing much, just holding stakes in great companies.

To invest in these 5 Small Dogs of the Dow, I would need to have a $26,853 lump sum. Sure, this is an option, but as I don't have free 26K to throw in the stock market, I would most probably go for dollar-cost averaging - acquiring stocks over a longer period of time, say 1 year, buying once in a month.

Options income is not so predictable as dividend income, but still, it seems some might be able to pull out around $600/monthly by selling just covered calls on these stocks. $600*12 = $7,200.

Now, this is some serious options income. By combined both options premium and dividend income, some could pull about $8,000 annually from these 5 stocks. That sounds like a 29% yield annually. Awesome

Currently I'm holding 100 DOW, 11 WBA.

I'm hoping to add 100 KO and missing 89 WBA in a timeframe of one year to my dividend stock portfolio. Not considering VZ and CSCO yet, as I'm still holding PFE stock (PFE got replaced by VZ in 2021) but you never know.

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