By OptionsZone Experts at InvestorPlaceEver wish that a great growth stock also paid a dividend? Well, if a company isn't forking over the dough, you'll just have to go out and get it yourself. All you have to do is write a covered call. A covered call is a popular option strategy in which you sell (i.e., write) enough call options to "cover" the shares of a stock that you own. When you do this, you bring in a premium that is yours to keep regardless of whether the stock gets called away from you, and this money is your synthetic dividend. Here are four covered call trades that should offer you growth and a "dividend":
Cisco Systems (CSCO)By Chris Johnson and Jon Lewis Early in May, Cisco Systems ( CSCO) came out with earnings results that beat analyst expectations by more than 7% thanks to both top-line growth and cost cutting. Despite the earnings beat, there was a larger question that company CEO John Chambers had to answer: What was Cisco going to do with the huge amount of cash on their balance sheet? Of course, whenever this question comes up, the first thing investors clamor for is a dividend. But that's not in the immediate future for Cisco, according to Chambers. But you can do better. Sell the CSCO Aug 25 Calls for around 30 cents, or $30 for every 100 shares you own. You'll net a "yield" of 1.3% even if the stock goes nowhere during the next five weeks. On the other hand, this trade can return more than 6% should the stock close at $25 or higher on Aug. 20.
Apple (AAPL)By Michael Shulman Forget the noise about the iPhone 4 having some issues. Apple ( AAPL) is not a great growth stock; it is the great growth stock. For starters, the company's margins are triple that of its competition. Despite being such a dominant brand, it has limited market share in cell phones and computers, and therefore, near unlimited growth potential. And it dominates two other segments, music players and tablets. AAPL is about as close to a perfect investment as you can get but, alas, it pays no dividend. So, with the stock at $250, if you buy it now and write an AAPL Oct 280 Call for every 100 shares you own, those options should net you about a $10 premium. If AAPL goes above $280 before expiration and you get called out, you'll have a net profit of $40. If the stock does not get called away, you do it again. And again. And again.