DFS Dividend Type Payments

Discover Financial dividend

Although DFS has no upcoming (meaning, Board-approved and announced) dividends, you can sell covered calls on Discover Financial to create 12 extra dividend type payments per year to boost its yield. Let's look at some recent prices (last updated Mon 4:16 PM ET):

Discover Financial (DFS)
Bid Ask Last Change Volume P/E Market Cap
59.95 65.99 59.90 -1.92 3.7M - 0.0B

DFS Dividend-Like Income Using Covered Calls

With DFS at 59.90, here's a table showing how big the annual "dividend" (ie. total annual call premium received) would need to be to attain 3%, 5%, and 10% annual yields. Also shown is the equivalent number of cents/day necessary to achieve each yield:

Annual Yield Annual Premium Cents/Day
3% 1.80 0.5
5% 3.00 0.8
10% 5.99 1.6

So now we need to find out of the money covered calls that pay at least the prescribed cents/day amount of time premium. That will generate income and, because they are out of the money, leave room for some upside potential on the stock. Here are some examples:

3% Yield On DFS Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Jan 11 66.00 0.15 26 0.6 0.01 (0.0%)
Jan 25 68.00 0.20 40 0.5 2.01 (3.4%)
5% Yield On DFS Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Jan 25 66.50 0.35 40 0.9 0.51 (0.9%)
Feb 1 67.00 0.45 47 1.0 1.01 (1.7%)

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