Kinder Morgan Is A Good Dividend Stock For Covered Calls, Puts Income Traders

Pick good undervalued dividend stocks with active and liquid stock options that can be used to generate weekly and monthly income by selling covered calls and puts options.

By Donald E.L. Johnson

Cautious Speculator

• Kinder Morgan (KMI) pays a 6.15% dividend.

• Its options are liquid.

• Demand for its natural gas and oil pipeline services are strong.

• I sold KMI puts and hold its covered calls.

Kinder Morgan (KMI), the pipeline company, is a good dividend stock for investors who are looking to enhance their yields by selling KMI covered calls and cash secured puts.

Today I closed my KMI 8.19.22 expiration $15 puts trade by buying the options back for $0.1. By closing 10 days early, I upped the annualized return on risk (ARoR) to over 15% from about 13%.

Then I sold KMI 8.26.22 $17 (delta -.15) puts for $0.11 for a 0.61% RoR, or 13.1% annualized–in an IRA. I’m also short KMI 8.26.22 $16 puts for $0.19, or 11.3% annualized.

My KMI 8.19.22 $19 strike covered calls, which I sold for $0.13 (5.2% ARoR), can be bought back for $0.02 or $0.03, but I don’t want to give up that much of the premium. So I’ll hold the calls another 10 days. If they’re called, I’ll take a nice profit and sell more KMI puts until I can buy the stock back at a discount.

Although KMI ($18.05) is moving up, it still has a bearish $13 price objective on its StockCharts.com point and figure chart. That is the risk in buying KMI.

KMI is trading above its 50- and 200-day moving average. The stock is sensitive to swings in gas and oil prices, but nowhere as sensitive as refiners or producers.

LINKs:

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Beware. Like all investing, trading stocks and options is risky. 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 IWM, DIA and other equities. I reserve the right to trade any of the listed stocks and options at any time. I receive no compensation for producing this content nor 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.