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We are just past the halfway point of the year, so it’s a good time to see where I stand with regard to my 2018 Portfolio Goals.

If I’m no longer projecting to reach my goals, making some adjustments now would still give me 6 months to get back on track.

As you may recall, I set 3 Portfolio goals for 2018 (see my 2018 Portfolio Goals post from the end of last year for the full write up).  I’ve heard many times that writing down goals is a key for success, so I thought I’d give it a try.  I kept my goal list small since it was my first time writing them down and trying to achieve them.

Revisiting my Portfolio Goals for 2018

1) Invest at least $15,000 of new capital in the Portfolio

At the time I wrote down this first goal, I was feeling good about the prospects for achieving it, given that I was able to accomplish it for each of the two prior years.  However, college expenses were looming, so there was an unknown about how much new capital might be available.

Well, at the halfway point, college expenses are anticipated to be less than projected… so that helps.  It turns out that I’ve made 11 buys and 3 sales in the 1st half of 2018 for a net investment of $18,980.18… well past my $15K goal.  I don’t expect to invest much more in the 2nd half of 2018.  As long as I don’t start liquidating Portfolio positions, I should stay above my target and have this goal accomplished at year’s end.

PROJECTION –> SUCCESS

2) Generate $1,800 in options income to then invest in the dividend Portfolio

This second goal was an unknown at the beginning of the year.  I’d only started trading options last year, and while I was successful, there was no telling if the success could continue given my short track record.  I set a target of generating $150/mo. in options income, which was about 25% more than what I did in 2017.

For the 1st half of 2018 I’ve been able to realize $980.90 in options income, or a tad less than $163.50/mo.  This is above my target amount of $150/mo. needed to achieve my goal.  However, I’ll have to stay diligent in order reach $1,800 by year’s end.  One negative month could set me back and make it difficult to reach my desired total.

PROJECTION –> TO BE DETERMINED, STILL UP IN THE AIR

3) Reach $8,700 in annual forward dividend income

I started 2018 with an annual forward dividend income of about $7,317 (or $609.75/mo.).  The goal was to add nearly $1,400 in forward dividend income to give me $8,700 by year’s end (or $725.00/mo.).

I was confident that I could reach a smaller total of $8,400 without too much trouble if I:

1) invest the $15K of new capital and $1.8K of options income at my then current portfolio yield of 2.52%

2) reinvest the $7,317 in forward dividends I was expecting in 2018 at my then current portfolio yield of 2.52%, and

3) pick up about an average 6% dividend raise across the current Portfolio holdings.

I suggested that getting to my $8,700 goal in annual forward dividend income could be possible by investing more than $15K in new capital and $1.8K in options income, by investing the new money (or the reinvested dividends) at a higher yield than 2.52%, or getting a larger average dividend raise than the projected 6%.

Well, at the halfway point, my annual forward dividend income stood at almost $8,457, or $243 short of my goal.  Clearly, the majority of what was needed to achieve my goal was obtained in the 1st half.  My investments have already exceeded my annual projection, and I’m certain the new capital was invested at a yield higher than 2.52%.  In addition, I believe my dividend raises have exceeded the 6% average that I was projecting.  So there were a few factors helping me in a positive way in the first half of the year.

If I assume that I don’t make any further new capital investments or invest any new options income, then reinvested dividends and dividend raises would have to carry me over the finish line.  Given that I have 6 months remaining in the year, I need to have a little over $40/mo. in new forward dividend income to reach my goal.  I think at least $20/mo. will come from the reinvested dividends, and that $20/mo. from dividend raises should not be a problem either (assuming no dividend cuts!).  Once again, as long as I don’t go liquidating Portfolio positions, which would reduce my forward dividend income, I’m in good shape to achieve this goal.

PROJECTION –> SUCCESS

Summary

Overall, it’s hard not to like my current position.  I project success for 2 of the 3 Portfolio goals, with the remaining goal (options income) still having a good chance for success.

I will say that having written the goals down earlier in the year keeps them in the forefront of my mind.  I usually factor them into decisions that impact my Portfolio.

Are you in good shape with respect to achieving your 2018 goals?  If not, are you making adjustments to rectify the situation?  Please feel free to share your current goal status.

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It’s July 1st and Independence Day is around the corner.  Fireworks will soon light up the sky.

However, I’ve already seen some fireworks recently… in my Portfolio!

I’m excited to bring you this month’s dividend income report, as June has been a record-setting month for dividends.

Let’s get to it!

Dividend Income

June’s dividend income totaled $1,032.69… say hello to a 4-digit month!  It’s my first one ever, and hopefully the first of many more to come.

Compared to the $814.15 from June 2017, this was a terrific 26.84% increase.  I don’t want to overlook how awesome a Year-over-Year (YoY) growth number like that is given the size of the dividend numbers here.  I couldn’t be much happier with these June results.

In addition, this month’s dividend total extended my streak of $500+ months to seven!  Keeping this streak alive next month may be a challenge as my projected dividend income is precariously close to $500.  Always more work to do!

A total of 18 companies paid me a dividend this month.  The largest amount came from Qualcomm (QCOM), delivering $118.58 – a very nice chunk.  The lowest amount came from Visa (V), at $17.07.  I’d like to boost this V payment, but V is looking pricey these days, so an addition will have to wait.

The dividend amounts from QCOM, Pepsico (PEP), Exxon Mobil (XOM), Target (TGT) and Realty Income (O) mainly increased as a result of additional purchases over the past year.  It appears I’ve been busy snapping up some shares this past year.

Increased amounts for the other companies were a result of dividend increases and reinvested dividends over the past year.

The lower dividend amount from VF Corp (VFC) was due to a partial sale nearly a year ago.

Just one new dividend payer arrived this June compared to last, and that was HanesBrands (HBI).  The amount from HBI was fairly substantial thanks to a couple of purchases over the past year.  It’s hard not to like another dividend source!

In contrast, this June also saw one dividend source go away, and that was W.W. Grainger (GWW), as I liquidated the position last October in favor of Fastenal (FAST).

In the “Add’l Fwd Inc” column, I show the amount of additional annual forward dividend income that resulted from reinvesting each of this month’s paid dividends.  June saw an addition of $33.35 from this category.  This was an increase from the comparable month last quarter (i.e. March), and my biggest monthly total so far in 2018.  Reinvesting my QCOM dividend generates almost $5 of additional forward dividend income all by itself.  Impressive!

Dividend Raises

Unlike May, June brought multiple dividend raises, including one on the first day of the month, eliminating any chance of being shutout.

In total, I had 5 Portfolio companies raise their dividend, two large and three small, with one of the large ones being completely unexpected.

Lowe’s (LOW) kicked off the month with a raise just north of 17%.  That’s what I like to see from any new addition to my Portfolio.

That was followed by a 3.23% raise from TGT.  I was hoping for more, but I won’t turn up my nose to a dividend raise.

The raise from W.P. Carey (WPC) translates to roughly 2% on an annual basis given that WPC is currently raising their dividend a consistent half penny on a quarterly basis.  Again, not too exciting, but a raise nonetheless.

Starbucks (SBUX) offered an earnings guidance update that disappointed investors, but with that update came news of more shareholder returns in the future, starting with a 20% dividend raise right now.  It’s too bad this raise couldn’t have come with positive earnings guidance.

Finally, Realty Income (O) delivered less than a quarter of a percent raise, but this is usually one of several that O delivers throughout the calendar year.  The annual dividend growth rates have been above 5% each of the past two years, so no complaints here.

These raises contributed $50.49 to my annual forward dividend income, which now stands at about $8,457.  It was nice to once again eclipse the $50 mark for the month, especially after May’s $ increase was less than $6.

I’d have to invest $1,863.10 at my portfolio’s average yield of 2.71% in order to equal the same boost to my annual forward dividend income that these dividend raises provided.

Next month I expect to see dividend raises from Hershey Co. (HSY) and Skyworks Solutions (SWKS).  Of course, unexpected dividend raises will always be welcome, too!

Dividends Due To New Investment

For the 2nd consecutive month, I had one sale and two purchases.  Quite the coincidence!

Early in June I sold my entire position in utility SCANA Corp. (SCG).  You can read all about this is my Recent Sell – SCG post.

One week later I started to deploy the sale proceeds in an attempt to replace the dividend income that was lost when I sold SCG.  The first purchase initiated a position in tobacco company Altria Group (MO).  My Recent Buy – MO post has my thoughts regarding this transaction.

I then followed up that purchase with another just a few days ago, adding to my shares of drug distributor Cardinal Health (CAH).  Details on this purchase can be found in my Recent Buy – CAH (#2) post.

The result of all these transactions was a small reduction in my forward dividend income.  Well, that stinks!  The sale of SCG brought a significant decrease of $219.30, while the purchase of the MO shares brought an increase of $140, and adding more shares of CAH brought an increase of $57.16, for a net of –$22.14 for June.  This is my first monthly net loss in this category this year.

Summary

The big news for June was recording over $1K in dividend income for a month for the first time ever!  I’ve been building towards this for 3 years and so it’s nice to cross that mark.

I got solid contributions from nearly 18 different companies.  The YoY growth continues to be strong as well.  In addition, I stayed above the $500 mark for dividend income for a 7th consecutive month.

June saw dividend raises coming back to being a significant contributor to my forward dividend income, and my reinvested dividends set a new high mark in June.

Perhaps the only negative for the month was the reduction of forward dividend income due to the sale of one of my Portfolio positions.

On aggregate though, my forward dividend income total in June was again boosted by the combination of reinvested dividends, dividend raises, and investment of new capital.  I continue to track this trio of income boosters each month this year, in the table below.

I don’t foresee a bunch of new capital investment for the remainder of the year, so I’m starting to believe that the ‘Dividend Raises’ total might outpace the combined totals of ‘Reinvested Dividends’ and ‘Investment of Capital’.  Considering that I might invest over $17K of new capital this year, and reinvest over $8K of dividends, the fact that Dividend Raises might generate more forward dividend income for me than those two sources is impressive.

June’s results left me needing $243 (or $40.50/mo.) of new forward dividend income to reach my goal of $8,700 by year’s end.  This is a slight decrease in the needed monthly amount compared to last month, so I’m still on track to achieve my annual goal.

It was a good June, and a good 1st half of 2018, and I’m excited to end them both with some dividend fireworks!  See you next time… enjoy the upcoming holiday.

Tell me you had some dividend fireworks in June, too!  I’d love to hear about them.  Please share in the comments!

I have updated the Portfolio & Dividends pages in conjunction with this monthly update.

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Engineering Dividends by Engineering Dividends - 2w ago

I last added to my Cardinal Health (CAH) position about 3 months ago, at $60.95/sh.  It was a small addition of 10 shares at that time.  Details on that purchase can be found my Recent Buy – CAH post from this past March.

After CAH delivered a poor earnings report in early May, its stock price dropped into the low $50s and has been hovering in that range for the better part of the last 2 months.

I’d been contemplating another add-on purchase of CAH in the low $50s when news came Thursday morning that Amazon (AMZN) was acquiring PillPack, an online pharmacy startup.  This news negatively impacted seemingly all of the retail pharmacy and drug distributor stocks, including CAH, and CVS Health (CVS) – another Portfolio holding of mine.

CAH dropped about 8% on that news, easily falling below $50/sh.  The stock hadn’t been trading that low since 2013.

The stock I was looking to add got unexpectedly less expensive, and I didn’t feel the news justified the magnitude of its price decline.

Unfortunately, CAH stock has been a dismal performer over the past year, dropping from $79 to $49, and it currently stands as the poorest performer in my Portfolio, but I have a sense that the selling may be overdone.

After some internal deliberation, I decided the time was right to acquire some additional CAH shares and bring down my average purchase price.

A turnaround may not come anytime soon, but I’ll see what improvement CAH can muster over the next quarter or two and re-evaluate my position then.

Let’s take a look at my purchase details…

CAH

On Thursday, 6/28/18, I purchased 30 shares at $48.95/sh, for a total of $1,468.50, bringing my total share count to 133.451 shares.

This purchase consumed the remaining proceeds from my recent sale of SCG, and some additional cash.

CAH shares were yielding ~3.89% at my purchase price.  This is well above my Portfolio average of approximately 2.65%, and even more significantly above CAH’s 5-year average yield of ~2.2%.

This purchase results in an additional $57.16 in annual forward dividend income.  This amount, added to the additional income that stemmed from my recent MO purchase, has replaced nearly all of the dividend income lost with the recent SCG sale.

As mentioned earlier, this purchase brings my CAH average share price down, but to only $68.34/sh.  Quite a ways to go before I’m profitable with this investment!

On a positive note, I made this CAH purchase on the last day before the stock went ex-dividend, so I’ll receive my enhanced CAH dividend payment in July.

As a bonus, here’s a look at the dividend growth history for CAH, dating back to the year 2000.

The last two or three years, the dividend growth rate has been on the decline, and this won’t be helped by CAH’s most recent annual dividend increase of ~3%.  The dividend growth will obviously be something to monitor moving forward.

Do you envision a gloomy future for CAH?  Or do you believe CAH has only experienced some short-term headwinds that it will eventually recover from?  Please feel free to leave your comments!

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Engineering Dividends by Engineering Dividends - 2w ago

Hello everyone!  Well, I’m a little late in delivering my Portfolio Thoughts post.  I was vacationing in the D.C. area for about a week and thought I’d have no problem putting out the post upon my arrival home.  However, I came down with a virus on the way home and consequently didn’t feel like doing anything but lay around once I arrived.  I’m still not 100%, but I figure if I don’t get this post out today, it may not happen at all.  So, expect this month’s post to be a tad more brief than normal.

As usual, I’ll go over my purchases & sales from this past month, see what price movement there’s been for my Portfolio holdings, and take a look at the stocks I’ve got on my watchlist.

Mixed in will be changes I’m contemplating to improve the Portfolio.  This might be thoughts about stocks I want to overweight or underweight, or stocks I wish to add or remove.

Here we go…

Transactions

Once again, I have a couple of Portfolio transactions to report.  This past month, I closed out my one-and-only utility position, and added a tobacco company.

The utility I sold was SCANA Corp (SCG).  There’s so much to discuss with this company there’s no way to summarize it nicely.  I recommend you check out my Recent Sell – SCG post for my reasoning behind the sell.

Most of the SCG sale proceeds were used to establish a starter position in Altria Group (MO).  Check my Recent Buy – MO post for more information on this transaction.

Price Movement

I’d say most of my stocks trended up this past month, along with the market.  Leading the charge upward with over 10% gains were a couple of stocks – HanesBrands (HBI) and Nexstar Media Group (NXST).

HBI had a good run from $18 to $22.  This was nice to see after HBI spent most of the early part of this year sliding down in price.

NXST was a stock a bought in mid-April.  This past month It moved up fairly significantly, from $67 to $76, providing a decent cushion should it give back some of the gains.  It always a pleasant development when a stock you purchase moves up in price shortly thereafter.

A couple of other names showing good upward movement were CVS Health (CVS) and Pepsico (PEP).  They fell short of the 10% gain mark, but not by too much.

CVS rose from $66 to $72.  Note – the ending price was as of the close of last week, so it does not account for today’s haircut in price.

PEP has been recovering from its recent lows, and moved from $100 to $108.

As for Portfolio stocks on the decline, I had only one fall more than 10%.

That prime laggard was Starbucks (SBUX), moving down from $57 to $51.  Again, my ending price was as of the close of last week.  Most of that loss came in the past week as SBUX moved swiftly downward after updating comparable store sales estimates, which came in below expectations, and confirmed fears of slowing growth.  SBUX has moved even lower in price since then.  On the bright side, SBUX said they planned to increase shareholder returns moving forward, and started that by delivering an unexpected 20% dividend raise.

A couple of other notable decliners on a percentage basis were Abbvie (ABBV), which fell from $101 to $94, and Air Lease (AL), which dropped from $44.50 to $41.50.

Watch List

My watchlist seems to have more stocks appearing these days.

Let’s start with possible additions to my existing Portfolio positions…

As mentioned last month, I’m looking to add to two of my smaller positions, Comcast (CMCSA) and Texas Instruments (TXN), in order to have them reach a more desirable Portfolio weighting.

I recently sold another put option on CMCSA after the last one expired.  Should the new option get assigned to me (for trading below the $32 strike price by mid-July), I would double my position.

As for TXN, it’s pulled back a decent amount to around $110, but I’m not looking to add until it trades below $100 again.

SBUX is now on my radar after its recent drop.  I was contemplating adding some below $55, but the recent news has me lowering my desired purchase price to the upper $40s.  I’d like to add 50 shares, but may have to settle for fewer shares with funds not being too readily available at the moment.

I’ve been looking at adding to my Cardinal Health (CAH) position with the stock price hanging out in the $51-$56 range most of the past month.

The recent price drops in Bank of the Ozarks (OZRK) and Air Lease (AL) have me contemplating additions to those as well, even though I feel I’ve got full positions.

With regard to non-portfolio stocks that I’m watching…

I continue to watch KAR Auction Services (KAR) – 4 months running now.  I’m looking to add should it drop below $50, but it’s been trading in the $52-$56 range for the entire time I’ve been watching it.  If earnings continue to improve, initiating a position in the $52s could be a possibility.

3M (MMM) is still on my radar as well, but it will have to drop further before I purchase.  Something in the $185- $190 range might motivate me to initiate a position.

Coming onto my radar are aerospace and defense company General Dynamics (GD), and engine-maker Cummins (CMI).  GD would look interesting in the $180-$185 range, while CMI would look intriguing in the $125-$130 range.

Thoughts?

Would you say more stocks have recently gained your attention for possible purchase?  If so, what stocks are you watching these days?  Please share your thoughts!

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Engineering Dividends by Engineering Dividends - 3w ago

Welcome to another Monthly Options Income post.  In these posts I discuss my various options activity, and report on my options income for the month, and year-to-date.

Here’s some background before I dive into the details of my options activity this past month.  Readers can skip the Background section if familiar with my previous options income posts.

Background

Last year I decided I’d try to generate some additional income by writing options contracts.  The plan is to use any options income I realize to help make additional purchases in my dividend Portfolio.

I write covered calls for a stock that I own and don’t mind selling at a selected strike price.

I write cash-secured puts for stock positions that I don’t own and wouldn’t mind buying at a selected strike price.  I also write cash-secured puts for stocks that I already own but wouldn’t mind adding more of at that price.

Ideally, the contracts I write will expire “out of the money”, my gain being the collected premium for writing the contract.  Alternatively, I may buy the contract to close it prior to expiration.  This might be done if I can capture the majority of the premium prior to expiration, or to avoid having the option be assigned to me.  In the case of Assignment, the option holders end up exercising their right to buy the underlying stock (in the case of a call) or sell the underlying stock (in the case of a put) at the strike price should it move “in the money” prior to expiration.  As the option writer, an assigned call means I sell the shares, and an assigned put means I buy the shares.

Options Activity

Below is a snapshot of my options spreadsheet, which I use to help keep track of the options activity.  The entire spreadsheet is not shown, just the options that had activity this past month.

Recent activity was a bit muted, but only in the sense of having a smaller number of options being set to expire this month.

As you can see, I wrote 3 options during the month (a normal amount) – two put options and one call option.  However, only 1 option was set to expire this month, and the others in future months.  Unfortunately, this limited the realizable premium income for this month.

More details on these options are in the sections that follow.  Note – the options #s in the sections below correspond to the numbers in the table.

Notes: Open DTE = Days To Expiration at the time the contract was opened, DOC Price = stock price on Date Opening Contract

Even though I collect the premium for writing the contract up front, I don’t realize the income until the contract is Closed or Expired.

If a put option is Assigned, the premium decreases the cost basis of the purchase.  If a call option is Assigned, the premium will increase the amount realized in the sale.

Previously Opened Options

I did not have any Open options at the end of last month.

Newly Opened Options

Once again, familiar names for my written options.  I wrote a put option for Comcast (CMCSA), a call option for HanesBrands (HBI), and a put option for Air Lease (AL).  All 3 of these stocks have seen previous options activity for me in 2018.

Option #17 – PUT CMCSA (COMCAST CORP) $31.50 EXP 06/15/18, premium = $55 (after commission)

I followed up last month’s CMCSA put option (which expired) with another at the same strike price ($31.50).  Since my CMCSA position is nearly the smallest in my Portfolio, I wrote another put option in an attempt to double my position and average down should the put be assigned.

At the time I wrote this option, CMCSA was trading for ~$31.78, or about 0.9% higher than the strike price.

Should this option expire out of the money, the $55 premium I would collect on the $3,150 I must reserve for the 21 days to expiration in case of assignment, translates to an annualized yield of 30.35% on that money.

Should this option be assigned to me, the $55 premium would reduce my cost basis on the acquired shares, resulting in a purchase of 100 shares at a cost of $3,095, or $30.95/share (prior to any commission).

Option #18 – CALL HBI (HANESBRANDS INC) $22 EXP 07/20/18, premium = $25

Back in February, I had 100 HBI shares assigned to me at $20.60 (after factoring in the $40 premium and the $21 strike price).

HBI shares sank into the $16 range over the next quarter, but recently made a nice recovery back to $21.  The shares had risen up to the $21 level in such a short time that I thought it would be a good time to write a covered call on those shares I acquired in February.  I figure if the call option does get Assigned and I have to sell 100 shares, that I would be doing it for $1.65/sh. more than I paid for them.  Since I have over 300 HBI shares, selling a portion of them is acceptable.

At the time I wrote this option, HBI was trading for $20.90, or 5% lower than the $22 strike price I selected.

Should this option expire out of the money, the $25 premium on the $2,090 value of the shares for the 38 days to expiration, translates to an annualized yield of 11.49% on that money.

Should this option be assigned to me, the $25 premium would add to my sale proceeds, resulting in a total of $2,225, or $22.25/share (prior to any commission & SEC fees).

Option #19 – PUT AL (AIR LEASE CORP) $45 EXP 08/17/18, premium = $200

With this option I extended the days to expiration I usually select.  The 64 days to expiration on this option is my longest yet, probably a good 30 days longer than typical.

In addition, I wrote an option that was already in the money… just the 3rd time I’ve done that.

Given the above, I stuck with a stock I know well in AL.

The extended DTE, and the option already being in the money, led to a higher premium than I normally see.  If I can realize the $200 premium on this option, it would be my largest yet.

At the time I wrote this option, AL was trading for $44.25.

Should this option expire out of the money, the $200 premium I would collect on the $4,500 I must reserve for the 64 days to expiration in case of assignment, translates to an annualized yield of 25.35% on that money.

Should this option be assigned to me, the $200 premium would reduce my cost basis on the acquired shares, resulting in a purchase of 100 shares at a cost of $4,300, or $43/share (prior to any commission).

Closed Options

I did not have any Closed options this month.

Expired Options

Only one option was set to expire this month, and it did.

Option #17 – PUT CMCSA (COMCAST CORP) $31.50 EXP 06/15/18, premium = $55 (after commission)

This option traded in the money for a good while, but rose in the week prior to expiration, and finished well out of the money.  I suspect that the green light of the AT&T acquisition of Time Warner and what that meant for other media companies, led to CMCSA’s rise in stock price the past week.

I would have been comfortable with assignment on this option, but I’m good with realizing the $55 premium as well.

Writing another put option on CMCSA this month is a possibility, but I may wait for a price lower than the current $33.88 it closed at last Friday.

  Assigned Options

I did not have any Assigned options this month.

Options Income

This month I saw a small amount of options income relative to the past couple of months.  Nevertheless, it continues to push my annual total forward.

My year-to-date options income total now stands at $980.90.  My monthly average is still above the $150/mo. pace needed to achieve my 2018 goal of $1,800.

Here’s a breakdown of the 2018 options income by month.

I do have a couple of Open options to carry into future months, one in July and one in August.  So, there’s the potential for collecting some premiums in the near-term.  In addition, I still have my Celgene (CELG) shares to write call options against, or to sell at a higher price than I paid, as a way to realize even more income as well.  CELG shares seem to be leveling off in the upper $70s for now, but this is well below my purchase price, so selling at a profit may be difficult unless the shares rally from here.

Summary

I couldn’t string together a 3rd options income month above $100, but I’ll take any positive amount, as it keeps me on pace to achieve my yearly $1,800 goal.

I did write one option with a longer duration than I normally have, so we’ll see how that pans out in the next couple of months.

I’ll see if I can write some additional options, too, as currently I’ve only got $25 of options premiums pending for July.  I don’t want to fall too far below my $150/mo. target.

Do you think I can reach my options income goal for this year?  If you trade options, what recent trades do you have open?  Please let me know in the comments.

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Engineering Dividends by Engineering Dividends - 1M ago

Last week I exited my position in SCANA (SCG), which you can read more about in my Recent Sell – SCG post.

Since then, I have been on the lookout for a replacement for my dividend Portfolio.  Initiating a new position, and/or adding to existing Portfolio positions, were both on the table.

As it turns out, I’ve initiated a position in one of the stocks I mentioned at the tail end of that last post, Altria Group (MO).

Altria Group is engaged in the manufacture and sale of cigarettes, cigars, pipe tobacco, smokeless tobacco products, and even wine.

This is my first foray into directly owning a tobacco company, and while I don’t use any tobacco products, I don’t have any real reservations about making an investment in the industry.

It’s no secret that smoking has been linked to many health-related issues (lung cancer and emphysema to name a couple), and that the smoking rate continues to drop as time passes.  So why invest?

Well, MO appears to be a stable company, with good management, decent earnings growth, and a healthy and growing dividend.  MO should also stand to benefit from the recent corporate tax cuts, seeing a reduction in tax rates from 35% to 21%.  There may even be a chance for some sales growth, although I’m certainly not investing in MO for its sales growth, as the industry is in decline, and there are always regulatory headwinds.

However, tobacco companies are aware of these trends and are taking steps to pivot their businesses.  As smoking has declined, there has been an increase in vaping and other smoking alternatives.  Former Altria spinoff Philip Morris (PM) launched iQOS a few years ago, which is a device designed to heat tobacco, as opposed to burning it, offering a less damaging way to consume the nicotine.  iQOS has shown some potential to be a growth driver internationally, but is not available in the U.S .yet.  It is expected iQOS will be available in the U.S eventually, and it needs to be licensed to MO before that can happen.

Another possible growth driver could be the legalization of cannabis at the federal level.  An established company like MO would have the packaging and distribution capabilities to take advantage of such a change in the law.  While it seems the trend is eventual legalization, this isn’t something that will become reality anytime soon.

The past year has seen MO stock under pressure, with the price dropping from $75 to $57.  I attribute this decline to renewed growth concerns and perhaps some rotation out of higher-yielding stocks as rising interest rates have made fixed-income investments more desirable.

Let’s take a look at my purchase details…

MO

On Tuesday, 6/12/18, I purchased 50 shares at $57.979/sh, for a total of $2,898.95.  This consumed most of the proceeds from my sale of SCG last week.

MO shares were yielding ~4.85% at my purchase price.  This is well above my Portfolio average of a little over 2.6%.

This purchase results in an additional $140.00 in annual forward dividend income, or $35 per quarterly payment.  This is only about 65% of what I lost with the SCG sale.  I’m hoping to use some of the remaining SCG proceeds and add a few shares to some of my existing Portfolio holdings, and fill some of the dividend income gap.

MO has a fairly short streak of dividend raises, at 9 years.  The dividend was reduced in both 2007 and 2008.  It’s not clear to me if this was a result of company-specific issues during the financial crisis, or primarily a result of the PM spinoff.

MO has raised its dividend twice in the past year, most recently declaring a 6% dividend raise in early March.  The dividend growth for MO has been solid, in the 8% range for the 1-year, 3-year, and 5-year time periods.  The payout ratio for MO is around 70%.

MO is the 41st stock in my Portfolio, essentially replacing SCG.  It starts with an initial weighting of ~0.9%, which puts it at the bottom of my holdings, wrestling that spot away from Texas Instruments (TXN).

I was able to make this MO purchase a couple of days before the stock went ex-dividend, so I’ll receive my first MO dividend payment in July – not a long wait at all!

Any thoughts on my MO purchase?  Do you own MO or PM in your portfolios?  If so, how have they been as an investment for you?  As always, I look forward to your comments!

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Engineering Dividends by Engineering Dividends - 1M ago

Three years ago, I initiated a position in utility SCANA (SCG).  SCG is a regulated electric utility based in the southeast U.S.  They also own other power-generating facilities such as nuclear, coal, hydro, natural gas and solar.

I bought 80 shares at just under $50/sh.  The investment appeared to be a good one with the stock rising over 50% (to over $75/sh.) just a little over one year later.  That’s a big move for a utility, as utilities traditionally offer a large yield and small price appreciation.

Over the next year, the stock drifted lower into the high $60s.  Given that I was still nicely profitable on my investment, and collecting a healthy dividend, I didn’t see a reason to sell.

Things changed for SCG in the middle of last year though.  SCG began to trend lower with rising interest rates, but declines really accelerated as investors became increasingly worried about SCG’s investment in its new nuclear plant that continued seeing delays and cost run-ups.  In late July 2017, the nuclear project was abandoned by SCG, leaving customers with nothing to show for the increased prices they paid in their monthly bills to help fund the project.

In the last 7 months of 2017, the price of SCG fell from just over $70 to just under $40.  Quite the plunge!  I considered selling SCG at the end of 2017.

Less than 1 week into 2018, Dominion Energy (D) and SCG agreed to an all-stock merger.  This temporarily boosted SCG’s price (to just under $50), and offered to remove the uncertainty regarding what might happen to SCG.   I was happy with the prospect of becoming a D shareholder.

In February, SCG froze their dividend in what typically would have been the time for a dividend raise.  This seemed fair in light of the pending merger.  As the additional early months of 2018 passed though, doubt about the merger completion grew, and the price of SCG drifted lower again, all the way to the mid $30s.

Just recently, SCG decided to delay a declaration of their Q2 dividend (which would normally pay on 7/1).  With the thought of possibly not getting a dividend anytime soon (maybe at all), and having to rely on a merger than seemed to be more in doubt every day that passed, I decided to cut my losses and exit my SCG position.  I figure there have to be better places for my investment.

SCG

On 6/5/18, I sold my entire SCG position of 89.509 shares at $37.01/share, for a total of $3,312.69 after SEC fees.

With the sale, I realized a long-term capital loss of $1,184.99, and a short-term capital loss of $40.69.  While I’m sad to realize a loss, I’m happy to be done with the uncertainty surrounding SCG and their merger with D.  I’m also happy to not have to worry about whether or not I’m getting a dividend from SCG moving forward.

With the sale, the number of stocks in my Portfolio drops to 40, and I realize a reduction of $219.30 in annual forward dividend income.  I’ll look to re-deploy the capital obtained in the sale into another dividend-paying stock soon.  I don’t want to be without those dividends for too long!

What Now?

As a result of the SCG sale I no longer have any utilities in my Portfolio.  As you may know, I tend to lean toward higher-growth stocks for the Portfolio, as opposed to higher-yield stocks, so utilities are not high on my list of stocks to acquire.  However, it seems I should have some exposure to the Utilities sector.  If I go this route, I’m looking at possibly investing in Dominion Energy (D), the stock I would own if the merger of SCG is completed.  D shares appear to be suffering as much as SCG lately, however, I have more confidence that D would be fine compared to SCG should the deal between them fall apart.  Southern Company (SO) is also on the table for purchase.

Outside of utilities, I’m looking at initiating a position in Altria (MO) to replace SCG.  MO’s yield is close to 5%, and would go a long way in replacing a good chuck of the dividend income lost with selling SCG.  I’ve never directly owned a tobacco stock before, so I’ll have to do some additional research here.

Adding to my positions in Cardinal Health (CAH) or Comcast (CMCSA) are a possibility as well.  Both stocks have suffered in recent months.  There could be values to be had, but of course there could be more uncertain times ahead, too.

A couple of stocks from my recent watchlist, KAR Auction Services (KAR) and 3M (MMM), have moved up in price recently, so those are not in play for me here.

Would you have decided to wait and see what plays out with SCG?  What do you think of my possible replacements for SCG?  Any other stock replacement ideas you think I should consider?  I look forward to your comments!

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Engineering Dividends by Engineering Dividends - 1M ago

Hey everyone… welcome to another monthly dividend income report.  This time I’ll be adding up May’s dividends.

It was another good month of dividends delivered by my Portfolio.  The dividends continue to arrive like clockwork, and the year over year (YoY) growth continues to leave me excited.

Let’s see those numbers!

Dividend Income

May’s dividend income totaled $590.19… creeping up on $600!  This extended my streak of $500+ months to six!  Compared to the $425.22 from May 2017, this was a superb 38.80% increase.

A total of 13 companies paid me a dividend this month.  The largest amount came from Omega Healthcare Investors (OHI), delivering $113.52.  The lowest amount came from my smallest portfolio position, Texas Instruments (TXN), totaling $15.50.

The dividend amounts from Hormel (HRL), Starbucks (SBUX) and Realty Income (O) mainly increased as a result of additional purchases over the past year.

Increased amounts for the other companies were a result of dividend increases and reinvested dividends over the past year.

There were no decreased dividends this month!  That’s 2 months in a row.  This usually occurs due to partial sales, although a dividend cut could be the culprit as well.  Thankfully, no dividend cuts have occurred within the Portfolio.

Two new dividend payers arrived this May.  The first was Nexstar Media Group (NXST), and the second was TXN.  These companies will continue to help diversify my dividend payment sources.

In the “Add’l Fwd Inc” column, I show the amount of additional annual forward dividend income that resulted from reinvesting each of this month’s paid dividends.  May saw an addition of $15.02 from this category.  This was a decrease from the comparable month of last quarter (i.e. February), solely as a result of choosing not to reinvest the dividend from OHI.  OHI already provides the largest dividend of the month, but I’m de-emphasizing its contribution moving forward.  I’m doing this by having sold of small portion of my shares recently, and by not reinvesting the quarterly dividends.  In August, I expect my dividend from OHI to be a shade over $80.

Dividend Raises

After a scorching start to 2018 with regard to dividend raises, and a slower pace in March & April, things cooled off even more in May.  Only 1 Portfolio company raised their dividend, and it was a modest one.

Cardinal Health (CAH) offered up an annual raise of 3.01%.  Given the recent struggles of CAH, any raise has to be viewed favorably.

I’m certainly happy one of my Portfolio companies delivered a raise, otherwise it would have been a shutout.

The raise contributed $5.75 to my annual forward dividend income, which now stands at about $8,395.  May’s $ increase thanks to dividend raises was a sharp drop from the $50+ totals I’ve had the past two months.  June should see some improvement though.

I’d have to invest $210.62 at my portfolio’s average yield of 2.73% in order to equal the same boost to my annual forward dividend income that the dividend raise provided.

Next month I expect to see dividend raises from Lowe’s Companies (LOW), Target (TGT) and W.P. Carey (WPC).  In fact, LOW actually already made an announcement on 6/1, but I’ll save that for next month’s report!

As I look over the dividend payer list for May, I see I’ve got two companies that have frozen their dividend for the time being: OHI and CVS.  OHI is dealing with lack of payments from a couple of its larger tenants, while CVS is planning to reduce its balance sheet leverage that will spike if the Aetna acquisition comes to fruition.  I’ll be monitoring these two closely over the coming months, but in the meantime it doesn’t look like I can expect a dividend raise from either of them anytime soon.

Dividends Due To New Investment

I had one sale and two purchases in May.

On the 1st of the month, I made a partial sale of OHI, and used the proceeds to add some shares of Pepsico (PEP).  You can read more about this is my Recent Transactions (OHI & PEP) post.

Then, about 1 week later, I initiated a position in LOW.  My Recent Buy – LOW post has my thoughts regarding this transaction.

The result of all these transactions was a small forward dividend income increase.  The partial sale of OHI brought a hefty decrease of $132, while the purchase of some PEP shares brought an increase of $51.94, and the purchase of LOW brought an increase of $98.40, for a net of $18.34 for May.

Summary

May was sort of a mixed bag.  I had some nice YoY growth on the dividend income side, and nearly touched $600 in dividend income.  I also stayed above the $500 mark for dividend income for a 6th consecutive month, so it was nice to extend that streak.  However, I only realized small gains with regard to forward dividend income (at least compared to months from earlier this year).

Although not as strong as previous months, my forward dividend income total was again boosted by reinvested dividends, dividend raises, and investment of new capital.  I continue to track this trifecta of income boosters each month this year, in the table below.

The totals for ‘dividend raises’ and ‘investment of new capital’ continue to vie for leadership in delivering additional forward dividend income.  I have a feeling that ‘dividend raises’ will be the leader by year’s end, as I don’t see me investing a lot of new capital.  It’s impressive to see the impact dividend raises can have on portfolio growth.

May’s results left me needing $305 (or $44/mo.) of new forward dividend income to reach my goal of $8,700 by year’s end.  This is a slight increase in the needed monthly amount compared to last month, but I’m still looking good to achieve my annual goal.

I now look forward to June dividends, where I expect terrific results to be achieved.  June will also bring a close to Q2’18, and provide a chance to see where I am with respect to my 2018 goals.  Until then…

Did your May dividend income bring any surprises?  Any big jumps in paid dividends or forward dividend income?  Please share in the comments!

I have updated the Portfolio & Dividends pages in conjunction with this monthly update.

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Engineering Dividends by Engineering Dividends - 1M ago

Time again for a monthly examination of my Portfolio via my monthly Portfolio Thoughts post.

I’ll go over my purchases & sales from this past month, see what price movement there’s been for my Portfolio holdings, and take a look at the stocks I’ve got on my watchlist.

Mixed in will be changes I’m contemplating to improve the Portfolio.  This might be thoughts about stocks I want to overweight or underweight, or stocks I wish to add or remove.

Let’s get to it!

Transactions

As has been the case in recent months, there are Portfolio transactions to report.  This past month, I had a partial sale, a small add-on purchase, and introduced a new stock to the Portfolio.

First, I had another stock swap if you will, paring back my position in Omega Healthcare Investors (OHI) and adding to my position in Pepsico (PEP).  You can read more about why I did this in my Recent Transactions (OHI & PEP) post.

Second, I initiated a position in Lowe’s (LOW).  Check my Recent Buy – LOW post for more information on this transaction.

Price Movement

Most of my stocks trended up this past month, along with the market.  Leading the charge upward with over 10% gains were a couple of tech names, a REIT, and a new addition to the Portfolio.

The tech names consisted of Qualcomm (QCOM) and Skyworks Solutions (SWKS).  Texas Instruments (TXN) was an honorable mention here with gains just shy of 10%.

QCOM has been up and down a few times over the past couple of years (trading in the range between $50 and $70) as the royalty dispute with Apple (AAPL) and QCOM’s purchase of NXP Semiconductors (NXPI) has dragged on, and the potential acquisition from Broadcom played out.  This month the stock price had a good climb from $51 to $60.

SWKS was a laggard from last month.  So this was essentially a bounce back, as the stock moved up from $87 to $100.  The earnings report from AAPL, which is a big customer for SWKS, helped ease some of the revenue shortfall fears that appeared to be baked into the SWKS stock price.

Many REITs have had an up and down month as they followed interest rate movements.  However, OHI had a fairly steady move up during the month, moving from $26 to $30.  My partial sale of OHI early in the month appears to have been about 3-4 weeks to early – Doh!  OHI has been mired in a slump for about the last 6 months as they addressed concerns about some of their larger tenants and the ability of those tenants to make future payments.

Contrary to my partial OHI sale, my LOW purchase seems to have been well-timed.  With the recent earnings report from LOW came some clarity about the company operations.  A new CEO was named, and along with it, hope for renewed growth.  LOW had a rather nice ascent from $82 to $97 during the month, with nearly all of the gains coming this past week.

As for Portfolio stocks on the decline, there always seem to be a few.  A few of the decliners are coming from the healthcare sector.  Luckily, only one stock fell more than 10%.

Cardinal Health (CAH) was my big loser this past month, plummeting from $64 to about $52.50 on the back of their earnings report.  CAH has been on the decline for 3 years now, and I’m not sure I see any good news to begin a turnaround.  I’m taking a wait-and-see approach for now.

Other Portfolio decliners in the healthcare sector for me are Gilead Sciences (GILD), CVS Health (CVS), and Johnson & Johnson (JNJ).  GILD dropped from $72 to $67, CVS fell from $70 to $66, and JNJ drifted down from $126.50 to $121.50.  Not a good month from my healthcare names.

Cognizant Technology Solutions (CTSH) pulled back from $82 to about $76 after their earnings report.  CTSH has had a really nice run since last October, so giving back some here is not surprising.  I still like the prospects for CTSH moving forward.

Watch List

The watchlist is always changing, but here are the stocks I’ve currently got my eyes on.

Let’s start with possible additions to, or deletions from, my existing Portfolio positions…

I’m looking to add to two of my smaller positions, Comcast (CMCSA) and Texas Instruments (TXN), in order to have them reach a more desirable Portfolio weighting.

I recently sold a put option on CMCSA, which would double my position should it be assigned for trading below the $31.50 strike price by mid-June.  I’m surprised CMCSA is trading in the low $30s, but it seems there is concern regarding their Sky bid (and having to possibly raise it), as well as for the debt that would come with the acquisition.

As for TXN, it’s had a run up in price this past month, so I’m not entertaining a new purchase at current levels.  I’d consider adding 25 shares should it trade below $100 again.

The drop in CTSH that I mentioned earlier has me watching that stock, too.  I could see adding ~20 shares should it drop to the low $70s.

Hershey (HSY) is another Portfolio holding that I’m watching now thanks to its price decline.  At its current level, HSY has only made minor price gains over the past 5 years.  The yield is decent at 2.84%, and I like the company in general, but the company has not been providing the kind of growth I’m looking for.  I need to decide if I want to continue to hold the stock, and add to my position down here (maybe at 3% yield, i.e. a price of ~$87).  One reason to sell is that I wouldn’t mind lightening up on my Consumer Discretionary holdings since they now sit at over 20% of my Portfolio with the fairly recent additions of CMCSA, Nexstar Media Group (NXST), and LOW.

With regard to non-portfolio stocks that I’m watching, these are holdovers from last month.

I continue to watch KAR Auction Services (KAR) – going on 3 months now.  I’m looking to add should it drop below $50, but it’s been trading in the $52-$56 range for the entire time I’ve been watching it.  If earnings continue to improve, initiating a position in the $52s could be a possibility.

3M (MMM) is still on my radar as well, but it will have to drop further before I purchase.  Something in the $185- $190 range might motivate me to initiate a position.

Follow Up

Following up on one my Portfolio stocks that I recently sold… Ensign Group (ENSG)

It appears I gauged incorrectly how high of a P/E level ENSG might trade at.  In mid-April I sold my entire position at $27.38/sh for a nice profit.  Unfortunately for me, it has continued to run up, and now trades at $36.16 only 6 weeks later.  Considering I held just over 200 shares, that’s about $1,800 I left behind.  ENSG may have reached overvalued territory at this point.

It’s never fun to report misses, but I want to ensure I highlight some of my poor investment decisions as well.  If only I had a crystal ball for stock price movement…

Thoughts?

What changes might you be looking to make in your portfolio?  What have you been watching recently for possible addition?  Please share your thoughts!

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Engineering Dividends by Engineering Dividends - 2M ago

Welcome to another Monthly Options Income post.  In these posts I discuss my various options activity, and report on my options income for the month, and year-to-date.

Let me provide some background before I dive into the details on my options activity.

Background

Last year I decided I’d try to generate some additional income by writing options contracts.  The plan is to use any options income I realize to help make additional purchases in my dividend Portfolio.

I write covered calls for a stock that I own and don’t mind selling at a selected strike price.

I write cash-secured puts for stock positions that I don’t own and wouldn’t mind buying at a selected strike price.  I also write cash-secured puts for stocks that I already own but wouldn’t mind adding more of at that price.

Ideally, the contracts I write will expire “out of the money”, my gain being the collected premium for writing the contract.  Alternatively, I may buy the contract to close it prior to expiration.  This might be done if I can capture the majority of the premium prior to expiration, or to avoid having the option be assigned to me.  In the case of Assignment, the option holders end up exercising their right to buy the underlying stock (in the case of a call) or sell the underlying stock (in the case of a put) at the strike price should it move “in the money” prior to expiration.  As the option writer, an assigned call means I sell the shares, and an assigned put means I buy the shares.

Options Activity

Below is a snapshot of my options spreadsheet, which I use to help keep track of the options activity.  The entire spreadsheet is not shown, just the options that had activity this past month.

It was another good month on the options front.  I started with 2 open put options that I carried into the month, and then opened 2 more put options during the month.  All 4 of these options had the same expiration date.  As the expiration day arrived, I closed 1 put option, and the remaining 3 expired out of the money.  The premiums realized from the closure and expirations nearly added up to a record options income haul for a single month… so close.

More details on these options are in the sections that follow.  Note – the options #s in the sections below correspond to the numbers in the table.

Notes: Open DTE = Days To Expiration at the time the contract was opened, DOC Price = stock price on Date Opening Contract

Even though I collect the premium for writing the contract up front, I don’t realize the income until the contract is Closed or Expired.

If a put option is Assigned, the premium decreases the cost basis of the purchase.  If a call option is Assigned, the premium will increase the amount realized in the sale.

Previously Opened Options

Here’s a recap of the two put options that were Open at the end of last month.

Option #13 – PUT AL (AIR LEASE CORP) $40 EXP 05/18/18, premium = $100

AL is currently the largest position in my dividend Portfolio, but I like the stock at the strike price.  I sold 100 shares of AL about 8 months ago at nearly $42, so buying them back at less than $40 given that AL traded over $50 just 3 months ago is enticing to me.

At the time I wrote this option, AL was trading for $41.50, or 3.75% higher than the strike price.

Should this option expire out of the money, the $100 premium I would collect on the $4,000 I must reserve for the 39 days to expiration in case of assignment, translates to an annualized yield of 23.40% on that money.

Should this option be assigned to me, the $100 premium would reduce my cost basis on the acquired shares, resulting in a purchase of 100 shares at a cost of $3,900, or $39.00/share (prior to any commission).

Option #14 – PUT OZRK (BANK OF THE OZARKS INC) $45 EXP 05/18/18, premium = $110

OZRK is one of the top 10 positions in my dividend Portfolio.  While I’m not necessarily looking to add more shares, picking more up below $45 is appealing to me.  I last added to this position about 1 year ago, picking up 50 shares at $44.56.  OZRK hasn’t seemed to benefit from the rising interest rate environment yet.  Perhaps the market is waiting for the interest rate spread between loans and deposits to show up on the bottom line.

At the time I wrote this option, OZRK was trading for $45.85, or just 1.89% higher than the strike price, helping to boost the premium.

Should this option expire out of the money, the $110 premium I would collect on the $4,500 I must reserve for the 32 days to expiration in case of assignment, translates to an annualized yield of 27.88% on that money.

Should this option be assigned to me, the $110 premium would reduce my cost basis on the acquired shares, resulting in a purchase of 100 shares at a cost of $4,390, or $43.90/share (prior to any commission).

Newly Opened Options

I’ve gone back to the well for this month’s new options.  I wrote a put option for Comcast (CMCSA) and a put option for Southern Company (SO).  Both of these stocks have seen previous options activity for me in 2018.

Option #15 – PUT CMCSA (COMCAST CORP) $31.50 EXP 05/18/18, premium = $50 (after commission)

I had a CMCSA put option assigned to me a couple of months ago, and I added the shares to my dividend Portfolio.  The stock has continued to drift consistently lower since that time, with its bid for Sky, and the burden of the financing for that, perhaps weighing on the stock.  Since my CMCSA position is nearly the smallest in my Portfolio, I decided to write another put option with an even lower strike price ($31.50), in an attempt to double my position and average down should the put be assigned.

At the time I wrote this option, CMCSA was trading for $32.20, or about 2.2% higher than the strike price.

Should this option expire out of the money, the $50 premium I would collect on the $3,150 I must reserve for the 21 days to expiration in case of assignment, translates to an annualized yield of 27.59% on that money.

Should this option be assigned to me, the $50 premium would reduce my cost basis on the acquired shares, resulting in a purchase of 100 shares at a cost of $3,100, or $31/share (prior to any commission).

Option #16 – PUT SO (SOUTHERN CO) $43 EXP 05/18/18, premium = $32 (after commission)

I had some SO shares called away last month at $45, essentially sold for $45.70 after factoring in the premium.  Early this month, SO took a quick tumble on concerns over rising interest rates.  I took the opportunity to write a put option on SO at a $43 strike price, hoping to re-establish my position at a price below $43.  Alternatively, should the stock not get that low, I’d happily collect some additional income should the option expire out of the money in just 10 days.

At the time I wrote this option, SO was trading for $44.16, or about 2.7% higher than the strike price.

Should this option expire out of the money, the $32 premium I would collect on the $4,300 I must reserve for the 10 days to expiration in case of assignment, translates to an annualized yield of 27.16% on that money.

Should this option be assigned to me, the $32 premium would reduce my cost basis on the acquired shares, resulting in a purchase of 100 shares at a cost of $4,268, or $42.68/share (prior to any commission).

Closed Options

As mentioned earlier, I Closed 1 of my put options this month.

Option #16 – PUT SO (SOUTHERN CO) $43 EXP 05/18/18, premium = $32 (after commission)

Early this week, I had a good feeling this option would expire out of the money.  However, as the week progressed, the stock traded steadily downward.  The decline was helped along with the stock going ex-dividend on the same day as my option expiration.  As option expiration neared, I became less comfortable with a possible assignment of the option, so I decided to close the option early on expiration day, and keep the cash I had reserved for the purchase in my account.  I had to give back most of the premium I got for writing the option in the first place, but I did make a small profit overall, and did avoid assignment, as the stock closed at $42.73.

This stock is a candidate for another put option this month, but with a lower strike price this time.

Expired Options

This is where most of the action was this month, with 3 of my put options expiring out of the money.

Option #13 – PUT AL (AIR LEASE CORP) $40 EXP 05/18/18, premium = $100

This option never got closer to being in the money than on the day the option was opened.  Since the start of May, AL’s stock price has climbed steadily, moving the option comfortably out of the money.  I happily realized the $100 premium.

Option #14 – PUT OZRK (BANK OF THE OZARKS INC) $45 EXP 05/18/18, premium = $110

This was another option that never got closer to being in the money than when it was opened.  The price for OZRK also moved steadily higher since the start of May, putting the option comfortably out of the money as well.  With such a nice margin of safety, not too much attention needed to be paid to this option.  I realized the $110 premium.

Option #15 – PUT CMCSA (COMCAST CORP) $31.50 EXP 05/18/18, premium = $50 (after commission)

This option was in limbo for a while, as Comcast (CMCSA) traded below its strike price during the time the option was Open, but it was not Assigned.  As the expiration date drew closer, CMCSA climbed back up in price, putting the option out of the money again.  I would have been comfortable with assignment on this option, but I’m good with realizing the $50 premium as well.

I may turn right around and write another put option on CMCSA this month.

  Assigned Options

I did not have any options Assigned this month.

Options Income

This month I realized a good amount of income, with a total of $266.00.  This was less than $3 short of last month’s record options income.

So with two nice months of income in a row, things appear to be picking up steam!  My year-to-date options income total now stands at $925.90.  My monthly average is now nicely above the $150/mo. pace needed to achieve my 2018 goal of $1,800.  In fact, I could earn $0 next month and still be ahead of my needed pace.  A welcome cushion to have.

Here’s a breakdown of the 2018 options income by month.

I don’t have any Open options to carry into next month, so if I want to realize some income from premiums next month, I’ll need to write some options.  Of course, I still have my Celgene (CELG) shares to write call options against, or to sell at a higher price than I paid, as a way to realize even more income as well.  Unfortunately, CELG shares have continued to pull back, so selling at a profit may be difficult unless the shares rally a good 10% from their current price.

Summary

Another stellar month as far as I’m concerned… nearly setting another record for monthly options income.  In addition, I continued to stay ahead of pace to achieve my yearly $1,800 goal.

My options efforts continue to yield extra income to further seed my dividend Portfolio, so I’m not looking to shake things up, rather just stay the course.  However, as mentioned last month, I may try to find a longer trade and see if I can realize a larger premium somewhere.

Do you have any thoughts of trading options in your future?  If so, what kinds of trades do you think you’d make?  And on what stocks?  Please let me know in the comments.

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