This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

3 Dividend Plays: Coca-Cola, CSX, McDonald's

If my shares are called away before trading ex-dividend (resulting from the option buyer wanting the dividend), I gain about 55 cents. The most I can make is $1.32 if I hold the covered call through option expiration day and the stock gets called away. I expect the shares to get called away as long as the option remains in the money.


Coca-Cola(KO - Get Report)

Background: Coca-Cola, a beverage company, engages in the manufacture, marketing and sale of nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages.

Yield: 2.77%

Dividend Amount: 26 cents

Ex-Dividend Date: Nov. 28

Beta: 0.51

Strategy: Buy Coca-Cola stock and offer to sell the December $35.00 strike or lower call for 21 cents over the intrinsic value. I will attempt to close out the trade with a gain of near 16 cents, plus dividend.

If my shares are called away before trading ex-dividend (resulting from the option buyer wanting the dividend), I gain about 21 cents. The most I can make is 47 cents if I hold the covered call through option expiration day and the stock gets called away.

The payout rate of the dividend is about 50% of this fiscal year's earnings and slightly less for next year's estimated earnings. The dividend has increased steadily, even during the financial meltdown in 2009.


CSX(CSX - Get Report)

Background: CSX, together with its subsidiaries, provides rail-based transportation services. It offers traditional rail service and the transport of intermodal containers and trailers.

Yield: 2.7%

Dividend Amount: 14 cents

Ex-Dividend Date: Nov. 28

Beta: 1.24

Strategy:

CSX is a different type of dividend trade. It's not worth selling a covered call because the option premium is only about five cents. But lack of option premium doesn't mean we can't profit from the upcoming ex-dividend date.

The rules of this trade are much different because it only makes sense if you are already bullish and want to buy CSX. Instead of buying CSX directly, buy the December $17.50 strike call for five cents above intrinsic value.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
CSX $31.47 -0.06%
MCD $99.18 0.99%
KO $40.57 -0.05%
AAPL $122.37 -0.50%
FB $95.28 -1.80%

Markets

Chart of I:DJI
DOW 17,745.98 -5.41 -0.03%
S&P 500 2,108.64 +0.07 0.00%
NASDAQ 5,128.7850 +17.0520 0.33%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs