12 DJI 30 Stocks Are Winners Year To Date; Good Covered Calls, Options Trades Ideas
The strategy is simple. Pick good under valued dividend stocks. I pick stocks with active and liquid options that can be used to generate weekly and monthly income by selling covered calls and puts.
By Donald E. L. Johnson
Cautious Speculator
Dow Jones Industrials are good dividend stocks and stocks for covered calls options trading.
Strong stocks in weak markets usually do best when markets rebound.
Bullish stocks are best for trading covered calls and cash secured puts stock options.
12 Dow stocks and DIA would make up a diversified stock portfolio and options trading portfolio.
The 12 stocks are: CVX, TRV, AXP, DOW, CAT, MRK, AMGN, KO, JNJ, UNH, INTC and VZ
Stock Picking is very important when it comes to buying dividend stocks and selling covered calls and cash secured puts (CSP) for additional retirement income and to beat inflation.
The Dow Jones Average 30 Industrials stocks are big, actively traded, widely followed and most have active, deep and liquid options markets. I wrote about selling covered calls on Dow (DOW), a chemical company in the DJIA 30.
Bullish, under priced mega caps are great covered calls and CSP stocks. This StockRover.com watch list shows the year to date (YTD) DJI 30 winners and losers.
The Dow’s YTD 12 winners are: Chevron (CVX), Travelers (TRV), American Express (AXP), Dow (DOW), Caterpillar (CAT), Merck (MRK), Amgen (AMGN), Coca-Cola (KO), Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Intel (INTC) and Verizon (VZ).
Some dividend investors focus on the 10 poorest performing stocks. They’re known as the Dogs of the Dow. They are: Walgreens (WBA), McDonald’s (MCD), Microsoft (MSFT), J.P. Morgan (JPM), Disney (DIS), Goldman Sachs (GS), Cisco (CSCO), Salesforce (CRM), Nike (NKE) and last and weakest YTD, Home Depot (HD).
Of the DJI 30, the best values based on their price to free cash flow ratios (P/FCF) are valued below the Dow’s 22.8 average P/FCF. Of the 12 YTD Dow winners, VZ, TRV, AXP, CVX and MRK look like the best covered calls and CSP prospects.
Except for CVX and TRV, the 12 winners are trading below analysts’ consensus target prices. Combined, the 12 stocks are trading at an average of 16.2 P/FCF ratios and at 3.5% below their target prices. They are about 18% below the highest analyst’s target price for each stock.
The 12 stocks average dividend yield is 2.8% with a 44% average payout ratio. Their average dividend annual growth rate is forecast at about 5.7%.
Stocks with Chowder rule averages above 10% are considered very good dividend stocks. I wrote about the Chowder Rule here. Please click on images and zoom in for better views of the watch list and the charts.
Question: Do you have any trades that you’d like to discuss? Please use the comments section below to discuss.
LINKs:
Home Page. See previous articles on other stocks and watch lists. If you read several of these articles, you’ll learn how this strategy is meant to work. No guarantees.
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A video on how to place options trades on Think or Swim.
Beware
Like all investing, trading stocks and options is risky. If you can’t sleep with market risks, you might want to let someone else do your trading. Consider an option trading ETF like XYLD, which I own. I also trade its calls and puts. I’m an active private speculator who trades covered calls and sells puts on stocks for my accounts. I am not a professional analyst nor a financial advisor. I don't take and won't take responsibility for how other people trade. This article is for educational purposes only. It is not advice. The data presented looked accurate at publication time except for intra-day fluctuations, but I can’t guarantee the accuracy. Traders should do their due diligence. I own and/or have options positions on several of the securities mentioned above. I reserve the right to trade any of the listed stocks and options at any time. I receive no compensation for producing this content or for any links.
@realDonJohnson. Because I don’t want to litter subscribers’ in boxes with emails, I write only one or two newsletters a day. I’m active most days on twitter where I tweet about stocks, options trades and other topics.