Turning Steel Into Gold: How to Quadruple Your Yield on Dividend Stocks

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 |  Includes: MT, NUE, STLD, WOR
by: Double Dividend Stocks

Want to turn steel into gold? Here are 4 undervalued dividend paying stocks from the Steel and Iron industry, with strong recent earnings growth, conservative debt loads and low 12-month PEGs, which you can earn double-digit annualized yields on by selling Covered Calls and Cash Secured Puts:

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All 4 stocks pay quarterly dividends, and 3 of them sport a very conservative dividend payout ratio.

Selling Cash Secured Puts: These 4 dividend stocks all have pretty high options yields, which you can take advantage of, and achieve a break-even price near their 52-week lows on 3 out of 4 of them.

These put option premiums pay you over 4 times and up to 8 times what the dividend premiums pay during this period:

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You can find more details on these and other put options sales in our Cash Secured Puts Table. There's also more info on the mechanics of selling puts at this article link.

Selling Covered Calls: Unlike selling cash secured put options, selling covered call options allows you to potentially participate in some price gains, if you sell calls at a strike price above the current price of the underlying shares. If the underlying shares are assigned/sold away from you, you'll gain the difference in price between your cost/share and the strike price you sold calls at. For example, the potential price gain for WOR is the highest one below, $1.54, ($22.50 strike minus $20.96 share price).

Selling covered calls also gives you an immediate lucrative option income stream, in addition to the dividends you'd collect. These call options pay 4 to 7 times what the dividends pay, which turns a moderate dividend yield of 2.5% to 3%+, into a double-digit annualized yield.

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You can find more details on these and other put options sales in our Covered Calls Table. Our July 22nd article offers more call options selling mechanics as well.

Valuations:

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Financials: Small cap Worthington Industries (NYSE:WOR) definitely wins in the management efficiency, interest coverage, and operating margin comps, and has been favored by investors for it with the only price gains ytd, (See the performance table below):

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Performance/Technical Data: With Relative Strengths of around 40, all 4 stocks are on the edge of oversold territory. Only WOR has made positive price gains year to date.

NUE-MT-PERF

Disclosure: No positions at this time.

Disclaimer: This article is for informational purposes only and isn't intended as individual investment advice.