The Dividend and Covered Call Hypothesis

The Dividend and Covered Call Hypothesis is an investment strategy that I have been thinking about.  Start with companies that pay good dividends, and sell covered calls on them.  You can get monthly cash flow on these as if it is a rental property.

The first step is to get a list of candidate stocks.  All should have revenue over $5 billion, and steady dividends.  Here is one list from US News and World Report:

#10: Newell Brands (Nasdaq: NWL) Dividend yield: 5.8 percent
#9: Altria Group (MO) Dividend yield: 6.1 percent
#8: Invesco (IVZ) Dividend yield: 6.2 percent
#7: Macy’s (M) Dividend yield: 6.2 percent
#6: Kimco Realty Corp. (KIM) Dividend yield: 6.4 percent
#5: AT&T (T) Dividend yield: 6.8 percent
#4 Ford Motor Co. (F) Dividend yield: 6.8 percent
#3: Iron Mountain (IRM) Dividend yield: 6.9 percent
#2: Macerich Co. (MAC) Dividend yield: 7 percent
#1: CenturyLink (CTL) Dividend yield: 8.3 percent

Take Newell.  The current stock price is $15.09, and the call for $16.00 sells for $0.03.  That is a yield of 2.3% per year.  Umm, nevermind, its not worth it.  But it might be worth on some stocks.