29 March, 2023 seen 3,448Selling naked puts on dividend stocks is one of my favorite income-generating strategies. I've been selling options…
On August 21, 2020, I sold 320 shares of First Trust Spclty Fin & Fncl Opptnts Fd (FGB) we had, getting $2.95 per share. We still are holding 410 shares with FGB.
FGB has been in our portfolio since July 2018. FGB is a dividend stock, which paid us about $83/quarterly (after-tax). In fact, we have been thinking for a while to build our portfolio around FGB stock for a while, but recent market developments and two dividend trims this year + the fact that FGB is not an optionable stock lead us to "flip it" to other better quality and optionable dividend stock. This time we went for two stocks actually. BCS and T.
BCS is a newcomer to our dividend/options portfolio, we are planning to add at least 100 new shares per month, for the next 3-4 months and sell covered calls every month.
Covered Call on BCS - Potential income return 5.05% in 31 days
We bought additional 100 shares of BCS paying $5.61 per share. We now hold 200 shares with BCS and our average price per share is $5.77
BCS stands for Barclays PLC - London headquartered multinationl bank holding company - Barclays plc is a British multinational investment bank and financial services company, headquartered in London, England. Apart from investment banking, Barclays is organized into four core businesses: personal banking, corporate banking, wealth management, and investment management
BCS also pays dividends - twice in a year
Also, we bought an additional 12 shares of AT&T (T ) paying $29.58 per share. T is a stock we keep in our daughter's stock portfolio. With its quarterly dividend of 0.52 cents per share, this latest buy has a dividend yield of 7.03% and will pay us an additional $6.24 every quarter (before tax). Awesome!
T is paying a dividend in the following months: February, May, August and November
We like T for many reasons - it is the so-called dividend aristocrat stock, the company has raised its dividend for the last 35 years. The company is also paying out a reasonably good dividend (above 6%), last but not least T is a good stock to sell options on (puts and calls). Our goal is to collect 100 shares and start selling covered calls.
For the rest of the year, we are looking to take $5.30 (after tax) from this buy, which is about 0.14% from our $3,600 goal for 2020
2019 in Review and Financial Goals for 2020.
We now are holding 33 shares of T, which contribute about $58.08(after tax) yearly to our dividend income portfolio yearly. Our average price per share: $30.42
67 shares to go once we will be able to start selling covered calls and generate extra income.
If we had 100 shares today, we could sell September 25, 2020, covered call (monthly options) with a strike price of $30.5, to get $0.41 premium. In case our shares would get called away on expiry we would realize $49 income in 30 days, that's a potential return of 1.61%