Using Options To Capture Dividends And Gains Ex-Dividend On These 15 Stocks

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 |  Includes: BLK, CHRW, CTB, FLO, FLR, JOY, LEA, ORAN, PEP, ROST, SEE, SLM, SWK, TDW, TRH
by: Robert Weinstein

There are many dividend capturing strategies, and I have used more than one. In this article we will go over a few stocks that have upcoming dividends that can be captured at a minimum amount of risk. The criteria that I use is that I must be able to sell a call option in either the front, or first back month that is in the money, and with enough premium that I will not mind getting exercised early (which happens often and can be a good thing if the trades are executed correctly).

This is one of my favorite and easy to understand methods of making gains through options and dividends. Although much of the gains will come from dividends, it should be noted in my experience, the option decay can provide a greater return. This is especially true in lower yielding stocks.

BlackRock, Inc. (NYSE:BLK)

  • Yield: 3.47%
  • Dividend Amount: $1.38
  • Ex-Dividend Date: Wednesday, August 31
  • Payment Date: September 22, 2011
  • Beta: 1.54

Strategy:

In combination with buying the stock, sell the September $155 strike call for $3.55 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $3.10 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -9.38 %, with a one year change of 12.35%.

Comparing to the S&P 500 price changes, the price performances are 1.67% vs. the S&P 500 from a month ago, and year to date difference is -9.70% vs. the S&P 500 price change.

France Telecom SA ADR (FTE)

  • Yield: 10.71%
  • Dividend Amount: $0.85
  • Ex-Dividend Date: Wednesday, August 31
  • Payment Date: July 20, 2009
  • Beta: 0.82

Strategy:

In combination with buying the stock, sell the September $17.50 strike call for $0.30 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.25 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -9.64 %, with a one year change of -6.06%.

Comparing to the S&P 500 price changes, the price performances are 1.38% vs. the S&P 500 from a month ago, and year to date difference is -5.00% vs. the S&P 500 price change.

PepsiCo, Inc. (NYSE:PEP)

  • Yield: 3.27%
  • Dividend Amount: $0.52
  • Ex-Dividend Date: Wednesday, August 31
  • Payment Date: September 30, 2011
  • Beta: 0.52

Strategy:

In combination with buying the stock, sell the September $60 strike call for $0.30 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.25 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -1.36 %, with a one year change of -2.40%.

Comparing to the S&P 500 price changes, the price performances are 10.67% vs. the S&P 500 from a month ago, and year to date difference is 4.64% vs. the S&P 500 price change.

Stanley Black & Decker, Inc. (NYSE:SWK)

  • Yield: 2.82%
  • Dividend Amount: $0.41
  • Ex-Dividend Date: Wednesday, August 31
  • Payment Date: September 20, 2011
  • Beta: 1.32

Strategy:

In combination with buying the stock, sell the September $57.5 strike call for $.95 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.87 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -10.30 %, with a one year change of 8.40%.

Comparing to the S&P 500 price changes, the price performances are 0.64% vs. the S&P 500 from a month ago, and year to date difference is -5.63% vs. the S&P 500 price change.

C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW)

  • Yield: 1.75%
  • Dividend Amount: $0.29
  • Ex-Dividend Date: Wednesday, August 31
  • Payment Date: October 03, 2011
  • Beta: 0.80

Strategy:

In combination with buying the stock, sell the September $65 strike call for $0.80 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.75 over intrinsic value.

In the last month, the stock has decreased in price -8.80 %, with a one year change of 1.83%.

Comparing to the S&P 500 price changes, the price performances are 2.32% vs. the S&P 500 from a month ago, and year to date difference is -10.30% vs. the S&P 500 price change.

Tidewater Inc. (NYSE:TDW)

  • Yield: 2.03%
  • Dividend Amount: $0.25
  • Ex-Dividend Date: August 31, 2011
  • Payment Date: September 15, 2011
  • Beta: 1.14

Strategy:

In combination with buying the stock, sell the September $50 strike call for $1.40 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $1.35 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -8.58 %, with a one year change of 24.58%.

Comparing to the S&P 500 price changes, the price performances are 2.57% vs. the S&P 500 from a month ago, and year to date difference is -0.64% vs. the S&P 500 price change.

Ross Stores, Inc. (NASDAQ:ROST)

  • Yield: 1.23%
  • Dividend Amount: $0.22
  • Ex-Dividend Date: August 31, 2011
  • Payment Date: September 30, 2011
  • Beta: 0.74

Strategy:

In combination with buying the stock, sell the September $70 strike call for $1.10 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $1.05 over intrinsic value.

In the last month, the stock has decreased in price -5.75 %, with a one year change of 41.20%.

Comparing to the S&P 500 price changes, the price performances are 5.74% vs. the S&P 500 from a month ago, and year to date difference is 23.07% vs. the S&P 500 price change.

Transatlantic Holdings, Inc. (NYSE:TRH)

  • Yield: 1.81%
  • Dividend Amount: $0.22
  • Ex-Dividend Date: August 31, 2011
  • Payment Date: September 16, 2011
  • Beta: 0.87

Strategy:

In combination with buying the stock, sell the September $40 strike call for $.75 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.68 over intrinsic value.

In the last month, the stock has decreased in price -5.67 %, with a one year change of 1.17%.

Comparing to the S&P 500 price changes, the price performances are 5.83% vs. the S&P 500 from a month ago, and year to date difference is 2.09% vs. the S&P 500 price change.

Joy Global Inc. (JOYG)

  • Yield: 0.95%
  • Dividend Amount: $0.175
  • Ex-Dividend Date: August 31, 2011
  • Payment Date: September 19, 2011
  • Beta: 2.04

Strategy:

In combination with buying the stock, sell the September $70 strike call for $1.75 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $1.65 over intrinsic value.

In the last month, the stock has decreased in price -21.71 %, with a one year change of 33.06%.

Comparing to the S&P 500 price changes, the price performances are -12.16% vs. the S&P 500 from a month ago, and year to date difference is -8.30% vs. the S&P 500 price change.

Flowers Foods, Inc. (NYSE:FLO)

  • Yield: 3.3%
  • Dividend Amount: $0.15
  • Ex-Dividend Date: August 31, 2011
  • Payment Date: September 16, 2011
  • Beta: 0.24

Strategy:

In combination with buying the stock, sell the September $17.50 strike call for $.25 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.20 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -17.48 %, with a one year change of 5.53%.

Comparing to the S&P 500 price changes, the price performances are -7.42% vs. the S&P 500 from a month ago, and year to date difference is 9.94% vs. the S&P 500 price change.

Fluor Corporation (new) (NYSE:FLR)

  • Yield: 0.89%
  • Dividend Amount: $0.13
  • Ex-Dividend Date: August 31, 2011
  • Payment Date: October 04, 2011
  • Beta: 1.25

Strategy:

In combination with buying the stock, sell the September $55 strike call for $1.65 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $1.45 over intrinsic value.

In the last month, the stock has decreased in price -11.36 %, with a one year change of 24.84%.

Comparing to the S&P 500 price changes, the price performances are -0.55% vs. the S&P 500 from a month ago, and year to date difference is -8.10% vs. the S&P 500 price change.

Lear Corporation (NYSE:LEA)

  • Yield: 1.15%
  • Dividend Amount: $0.13
  • Ex-Dividend Date: August 31, 2011
  • Payment Date: September 21, 2011
  • Beta: N/A

Strategy:

In combination with buying the stock, sell the September strike call for $.75 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.65 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -9.75 %, with a one year change of 16.36%.

Comparing to the S&P 500 price changes, the price performances are 1.26% vs. the S&P 500 from a month ago, and year to date difference is -4.78% vs. the S&P 500 price change.

Sealed Air Corp. (NYSE:SEE)

  • Yield: 3.04%
  • Dividend Amount: $0.13
  • Ex-Dividend Date: August 31, 2011
  • Payment Date: September 16, 2011
  • Beta: 1.41

Strategy:

In combination with buying the stock, sell the September $17.50 strike call for $1.05 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $1 over intrinsic value.

In the last month, the stock has decreased in price -20.14 %, with a one year change of -16.48%.

Comparing to the S&P 500 price changes, the price performances are -10.40% vs. the S&P 500 from a month ago, and year to date difference is -26.98% vs. the S&P 500 price change.

Cooper Tire & Rubber Company (NYSE:CTB)

  • Yield: 3.57%
  • Dividend Amount: $0.11
  • Ex-Dividend Date: August 31, 2011
  • Payment Date: September 30, 2011
  • Beta: 2.40

Strategy:

In combination with buying the stock, sell the September $10 strike call for $.3 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.25 over intrinsic value.

In the last month, the stock has decreased in price -30.60 %, with a one year change of -32.28%.

Comparing to the S&P 500 price changes, the price performances are -22.14% vs. the S&P 500 from a month ago, and year to date difference is -45.85% vs. the S&P 500 price change.

SLM Corporation (NASDAQ:SLM)

  • Yield: 2.92%
  • Dividend Amount: $0.1
  • Ex-Dividend Date: N/A
  • Payment Date: September 16, 2011
  • Beta: 1.44

Strategy:

In combination with buying the stock, sell the September $12 strike call for $.25 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.17 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -11.79 %, with a one year change of 23.00%.

Comparing to the S&P 500 price changes, the price performances are -1.03% vs. the S&P 500 from a month ago, and year to date difference is 17.96% vs. the S&P 500 price change.

Remember: You must buy a stock at least three business days before the record date (at least one business day before the ex-dividend date) to qualify for a dividend.

This article should only be considered educational, and not used for trading in isolation. I am not suggesting anyone else follow what may be appropriate for me. This is not a "sure thing" and risk is involved. A good example of what can happen is when BP after declaring a dividend, pulled it back before payment.

The stock tanked for months. I don't expect to be able to sell options in every case and I will not move on the minimum premium needed. Using options only partially hedges risk, but offers little protection from "fat-tail" events (also known as black swans).

I use a proprietary blend of technical analysis, financial crowd behavior, and fundamentals in my short-term trades, and while not totally the same in longer swing trades to investments, the concepts used are similar. Nothing in the article should be considered investment advise, but you may want to use this article as a starting point of your own research with your financial planner. I use Seeking Alpha, Edgar Online, Google Finance, MSN Money, cnbc.com, Zacks and Yahoo Finance for most of my data.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BLK, FT, PEP, CHRW, TDW, ROST, TRH, JOYG, FLO, FLR, LEA, SEE, CTB, SLM over the next 72 hours.