LUV Dividend Type Payments

Southwest Airlines Co dividend

Although LUV has no upcoming (meaning, Board-approved and announced) dividends, you can sell covered calls on Southwest Airlines Co 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):

Southwest Airlines Co (LUV)
Bid Ask Last Change Volume P/E Market Cap
52.25 52.45 52.44 +0.14 2.9M 12 28B

LUV Dividend-Like Income Using Covered Calls

With LUV at 52.44, 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% 1.57 0.4
5% 2.62 0.7
10% 5.24 1.4

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 LUV Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Jul 26 57.00 0.10 9 1.1 4.55 (8.7%)
Aug 2 57.00 0.10 16 0.6 4.55 (8.7%)
5% Yield On LUV Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Jul 26 57.00 0.10 9 1.1 4.55 (8.7%)
Aug 2 56.50 0.15 16 0.9 4.05 (7.7%)
10% Yield On LUV Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Jul 26 56.00 0.15 9 1.7 3.55 (6.8%)
Aug 2 55.50 0.30 16 1.9 3.05 (5.8%)

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Want more examples? LULU Dividend | LVL Dividend