Consolidated Edison: 25% Annualized Yield On A Dividend Aristocrat's Next Payout

Jul. 18, 2020 9:15 AM ETConsolidated Edison, Inc. (ED)27 Comments


  • Con Ed yields 4.26% and will go ex dividend ~8/13/20 for $.756.
  • An August out of the money covered call option trade yields 2.5% in five weeks, or over 25% annualized.
  • Earnings, guidance, analysts' targets, profitability, performance, financials, debt, and valuations are detailed.
  • Looking for a helping hand in the market? Members of Hidden Dividend Stocks Plus get exclusive ideas and guidance to navigate any climate. Get started today »

Looking to replace some missing income from slashed dividends? You may want to consider selling options. Trading strategies such as writing covered calls and selling cash secured puts began to gain more traction in the 2008-2009 market meltdown, when previously dependable dividend-paying stocks began cutting their dividends.

Flash forward 12 years to the 2020 COVID-19 crash, and we're seeing that scenario play out again.

"S&P 500 companies slashed or suspended over $40 billion in dividends in the second quarter, the deepest quarterly drop since 2009." (Dow Jones)

Since option premiums are often much higher than quarterly dividends, you can replace some of your missing dividend income via some short-term and near-term option-selling trades.

There are several wrinkles to option selling. In general, you get paid lower option premiums when you sell at option strike prices which are further away from the underlying stock's price.

The flip side of that is that, when selling covered calls, you're less likely to have the underlying shares assigned/sold away from you. Conversely, when selling cash secured puts, selling at a put strike price which is further below the underlying stock's price/share lessens your chances of having that stock put/assigned to you.

This calls to mind a recurring theme in options selling - most veteran options-selling traders try to only sell options on stocks which they want to own or already own. Even though there may a whopper of an option yield on a volatile stock, there may be a good reason for that, so "seller beware."

If you want to play it conservatively, maybe consider selling options on large cap, well known stocks, such as one of the Dividend Aristocrats, for example.

Consolidated Edison, Inc. (NYSE:ED) was founded in 1884, and is a member of the Dividend Aristocrats, having raised its dividend for 46 consecutive

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This article was written by

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Target 5-10% yields backed by solid earnings for better portfolio income.

Robert Hauver, MBA, was VP of Finance for an industry-leading corporation for 18 years, and publishes SA articles under the name DoubleDividendStocks. TipRanks rates DoubleDividendStocks in the Top 25 of all financial bloggers, and Seeking Alpha rates us in the Top 5 of several categories, including Dividend Ideas, Basic Materials, and Utilities. 

"Hidden Dividend Stocks Plus", a Seeking Alpha Marketplace service, which focuses on undercovered and undervalued income vehicles. HDS+ scours the world's markets to find solid income opportunities with dividend yields ranging from 5% to 10%-plus, backed by strong earnings.

Disclosure: I am/we are long ED. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Our service features options selling for dividend stocks.

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Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

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