Options Trade & Update - JNJ & PG

Procter & Gamble's recent weakness has provided a good opportunity to sell a naked put.  I'd also love to have PG as a core holding if I can get it at the right price.  I decided to close out my JNJ October put for a small profit so I could sell a PG July put without needing more cash.  If PG gets assigned then I'll own PG for a total cost of $61.08/share and a YOC of 3.68% (before fees).  

Open:

01/23/12 Sold 1 KMI June 16 '12 $30 Put @ 2.25
03/12/12 Sold 1 AZN Oct 20 '12 $45 Put @ 3.00
03/28/12 Sold 3 BBVA July '21 '12 $7 Puts @ .55
04/09/12 Sold 1 VOD July 21 '12 $27 Put @ 1.45

04/25/12 Sold 1 CHK July 21 '12 $16 Put @ 1.13

04/30/12 Sold 1 PG July 21 '12 $62.50 Put @1.42

Closed Out:

04/12/12 Sold 1 JNJ Oct 20 '12 $62.50 Put @ 2.60 

04/30/12 Bought to Close 1 JNJ Oct 20 '12 $62.50 Put @ 1.62

Profit: $98 before brokerage fees (not bad for only waiting 18 days)

01/19/12 Sold 2 TSM July 21 '12 $15 Puts @ 1.80
04/09/12 Bought to Close 2 TSM July 21 '12 $15 Puts @ 1.03
Profit: $154 before brokerage fees


01/03 - Sold 1 RIG $35 May 19 '12 PUT @ 2.11
03/12 - Bought to Close 1 RIG $35 May 19 '12 Put @ .09
Profit: $202.00 before brokerage fees 


01/06 Bought 10 SLV Jan 19 '13 $45 Calls @ 1.05
01/26 - Sold to Close 5 SLV Jan 19 '13 $45 Calls @ 1.85
02/28 - Sold to Close 5 SLV Jan 19 '13 $45 Calls @ 2.03
Profit: $890 before brokerage fees


Total Profit before fees: $1344

April 2012 - Dividend Update

Here's an update for the month of April.  I received a total of $132.87 in dividends.  This marks my second month ever to receive over $100 in dividends, and it was two months in a row.  It was largely helped by the yearly Novartis (NVS) dividend.  I'm hoping to break $100 again for May.

April - $132.87
     NVS - 99.29
     HNZ - 19.64
     MO - 13.94

Johnson & Johnson (JNJ) Increases Quarterly Dividend

Johnson & Johnson (JNJ) announced this morning at their annual shareholder meeting a quarterly dividend of .61 per share, this is a 7% increase from .57 per share.  Their previous increase was from .54 to .57 and only a 5.6% increase.  This marks their 50th consecutive dividend increase!

The next quarterly dividend is payable on June 12th to shareholders of record as of May 29th.

I like to see companies consistently increase their dividends but it's also nice to see them increase at a higher rate.  This tells me the company is doing well.  I'd rate JNJ a buy at today's prices, it's currently yielding 3.77% with the dividend increase.

I might add to my position over the course of the next couple of weeks.

Options Trade - Chesapeake Energy (CHK)

I sold 1 CHK July 21 '12 $16 Put for $1.13.  If these 100 shares get assigned I'll own 100 shares of CHK for $14.87 / share before commissions.  This would give me an effective yield on cost of 2.35%.  Otherwise I'll collect $113 for waiting.  

This is more of a value/speculation play than a DG investment.  I will likely put these shares in another portfolio if assigned.

Chesapeake Energy Corporation (Chesapeake) is a natural gas and oil exploration and production company. Chesapeake is engaged in the exploration, development and acquisition of properties for the production of natural gas and oil from underground reservoirs. It also provides substantial marketing, midstream, drilling and other oilfield services. Its operations are located onshore and in the continental United States. As of December 31, 2011, the Company owned interests in approximately 45,700 producing natural gas and oil wells that produced approximately 3.5 billion cubic feet of natural gas equivalent per day, net to its interest. The Company operates in three segments: exploration and production; marketing, gathering and compression, and oilfield services. In June 2011, the Company acquired Bronco Drilling Company, Inc. In December 2011, CMD sold its wholly owned subsidiary, Appalachia Midstream Services, L.L.C. (AMS).

Here's an updated list of my active options:

Open:

01/23/12 Sold 1 KMI June 16 '12 $30 Put @ 2.25
03/12/12 Sold 1 AZN Oct 20 '12 $45 Put @ 3.00
03/28/12 Sold 3 BBVA July '21 '12 $7 Puts @ .55
04/09/12 Sold 1 VOD July 21 '12 $27 Put @ 1.45

04/12/12 Sold 1 JNJ Oct 20 '12 $62.50 Put @ 2.60

04/25/12 Sold 1 CHK July 21 '12 $16 Put @ 1.13

Purchased 40 ConocoPhillips Ex Distrib. (COP.WI)

I purchased 40 shares of COP.WI @ $55.66/share this morning.

As many of you know, ConocoPhillips plans to separate their refining business from their upstream oil exploration and production business at the end of the month.  Phillips 66 (currently priced as PSX.WI) will become a separate publicly traded refining business with ticker PSX.  For every 2 shares of COP held, you will receive 1 share of PSX.  COP also plans to payout 20-25% of their Operating Cash Flow (OCF) as a dividend which I believe would keep their existing dividend of 2.64, giving it a YOC of about 4.7% at today's price.  There's a good article here on Seeking Alpha.

I hold 30 shares of COP today so I will receive 15 shares of PSX.  My plans are to sell the PSX shares which will be yielding just a little over 2%.  I will keep the new COP along with the 40 shares I purchased today for a total of 70 shares.

Investors have 3 options for playing COP right now.  You can buy COP pre-split with the normal ticker, you can buy shares of the new COP (COP.WI) or you can buy shares of the new Phillips 66 (PSX.WI).

Purchased 35 Dow Chemical (DOW)

I purchased 35 shares @ 33.05/share giving me about a 3.9% yield on cost. 

The Dow Chemical Company (DOW) is a diversified manufacturer and supplier of products used primarily as raw materials in the manufacture of customer products and services worldwide. It operates in six segments. Dow provides services to a range of industries, including appliance, automotive, agricultural, building and construction, chemical processing, electronics, furniture, house wares, oil and gas, packaging, paints, coatings and adhesives, personal care pharmaceutical, processed foods, pulp and paper, textile and carpet utilities, and water treatment. Its portfolio includes specialty chemical, advanced materials, agrosciences and plastics businesses deliver a range of technology-based products and solutions to customers in approximately 160 countries. In March 2012, the Company's subsidiary Dow AgroSciences LLC, divested its European Dithane fungicide business to Indofil Industries Ltd.

I found out Thursday that DOW increased their dividend by over 25% which brought their dividend near a 4% yield.  I decided to pull the trigger early Friday morning.  This was my first trade using my cell phone.  I have to say I am impressed with ETrade mobile.  DOW wasn't really on my radar until the huge dividend increase. 

I owned DOW for part of last year, I got in on 10/04 at 22.04/share and sold out on 10/11 at 26.98/share after the quick run-up.  It turns out that I should have just held the shares.  Although they cut their dividend during the financial crisis, they have almost increased it back to where it once was.  With natural gas staying cheap, this is boosting their profits and I believe they can continue increasing the dividend for the foreseeable future.

Options Trade - Johnson & Johnson (JNJ)

I've been out of town since last Wednesday and have a couple of updates.  The first is an options trade on JNJ.  I received notification last Thursday that a limit order on a JNJ put wase filled.

I sold 1 JNJ Oct 20 '12 $62.50 Put for $2.60.  If these 100 shares get assigned I'll own 100 shares of JNJ for $59.90 / share before commissions.  I also expect JNJ to raise the dividend that's payable in June to .60.  This would give me an effective yield on cost of 4%.  Otherwise I'll collect $260 for waiting. 

Here's an updated list of my active options:

Open:

01/23/12 Sold 1 KMI June 16 '12 $30 Put @ 2.25
03/12/12 Sold 1 AZN Oct 20 '12 $45 Put @ 3.00
03/28/12 Sold 3 BBVA July '21 '12 $7 Puts @ .55
04/09/12 Sold 1 VOD July 21 '12 $27 Put @ 1.45

04/12/12 Sold 1 JNJ Oct 20 '12 $62.50 Put @ 2.60

Options Trade & Update - VOD & TSM

I decided I wanted some Vodafone (VOD) shares to compliment my shares of Verizon (VZ) in my portfolio but at a cheaper price so I sold puts this morning.  I Sold a Vodafone (VOD) July 21 '12 Put at $27 for $145 before commissions.  I don't mind if these get assigned, as it will be the same as if I bought 100 shares for around $25.55/share before commissions.

To me this is a win/win.  I get a stock I want at a cheaper price or I collect $145 to wait 3 months.  

I also closed out the Taiwan Semiconductor (TSM) June 16 Puts for a profit of $154.

Open:


01/23/12 Sold 1 KMI June 16 '12 $30 Put @ 2.25
03/12/12 Sold 1 AZN Oct 20 '12 $45 Put @ 3.00
03/28/12 Sold 3 BBVA July '21 '12 $7 Puts @ .55
04/09/12 Sold 1 VOD July 21 '12 $27 Put @ 1.45

Closed Out:

01/19/12 Sold 2 TSM July 21 '12 $15 Puts @ 1.80
04/09/12 Bought to Close 2 TSM July 21 '12 $15 Puts @ 1.03
Profit: $154 before brokerage fees


01/03 - Sold 1 RIG $35 May 19 '12 PUT @ 2.11
03/12 - Bought to Close 1 RIG $35 May 19 '12 Put @ .09
Profit: $202.00 before brokerage fees 


01/06 Bought 10 SLV Jan 19 '13 $45 Calls @ 1.05
01/26 - Sold to Close 5 SLV Jan 19 '13 $45 Calls @ 1.85
02/28 - Sold to Close 5 SLV Jan 19 '13 $45 Calls @ 2.03
Profit: $890 before brokerage fees

Goals - Quarterly Update

The first quarter of the year is over.  Let's see where we are and where we need to go.  

So my main goal this year when I started this blog was to achieve a dividend income level of $2000.  What I mean by this is that I want to get my portfolio to the point where it would produce $2000 in the following 12 months.  The reason I use this metric instead of current year dividends is that I want to know what dividend income to expect if I stopped reinvesting dividends right now.  So right now I'm at $1300.  I need $700 more in yearly dividend producing income.  Some of this could come from dividend increases but the majority of this will be through new purchases.  If the stocks I purchase average 3.5% yields then I will need to purchase $700/.035 or $20,000 worth of stock.  If they average 3% yields then I will need to purchase $700/.03 or $23,333.33 worth of stock. 

The main issue will be to find high quality stocks that aren't too overvalued at this point.  Let's face it, the market has had a huge run-up since last fall.  As the market continues to rise faster than dividend growth rates the dividend yields start to fall.  This means I will have to spend more money for the same amount of income unless I increase my risk profile.  I'm hoping for some sort of a correction.  I have a feeling the majority of my purchases will be in the second half of the year.

I'm also saving for a home purchase within the next 12 months and have a few trips planned including going to Germany in the fall.  I want to do some traveling before I have kids.  It's tough sometimes to manage having a life and being a dedicated investor.  This could throw a damper on my goal but I think I will still be able to manage it.

Some stocks I'm currently watching:  WAG, COP, UGI, VOD, LMT, UL, RTN, MCD, HAS, TGH, WMT, PEP, BDX, AFL