IBM Dividend Type Payments

INTL BUSINESS MACHINE dividend

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

INTL BUSINESS MACHINE (IBM)
Bid Ask Last Change Volume P/E Market Cap
144.80 146.00 145.34 +1.43 5.2M 23 131B

IBM Dividend-Like Income Using Covered Calls

With IBM at 145.34, 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% 4.36 1.2
5% 7.27 2.0
10% 14.53 4.0

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 IBM Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Aug 24 149.00 0.16 9 1.8 3.00 (2.1%)
Aug 31 150.00 0.27 16 1.7 4.00 (2.8%)
5% Yield On IBM Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Aug 24 148.00 0.28 9 3.1 2.00 (1.4%)
Aug 31 149.00 0.41 16 2.6 3.00 (2.1%)
10% Yield On IBM Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Aug 24 147.00 0.50 9 5.6 1.00 (0.7%)
Aug 31 147.00 0.92 16 5.8 1.00 (0.7%)

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