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How I Replaced Lost Dividend Income With Options Income

Published Thu, 30 Jul 2020 09:15:11 -0400 on Seeking Alpha

Seeking AlphaFixed IncomeHow I Replaced Lost Dividend Income With Options IncomeJul. 30, 2020 9:15 AM ET|| Includes: D, DIS, ETO, ROST, SPG, TJX, WFCby: FerdiSFerdiS Dividend growth investing, portfolio strategy, long-term horizon, valueDivGro.cls-1{fill:#024999;}SummaryMy DivGro portfolio suffered several dividend cuts and suspensions, reducing my projected annual dividend income by about $1,832.
Generally, I close positions following dividend cuts or suspensions. However, I think the COVID-19 pandemic has created an extraordinary situation, so I decided not to act now.
Instead, I sold covered calls to replace the lost dividend income. This article explains the strategy and provides details.

The COVID-19 pandemic has created a challenging environment for dividend growth investors. More than 600 companies announced dividend cuts or suspensions during the second quarter of 2020, even companies with long histories of annual dividend increases.
My DivGro portfolio suffered several dividend cuts and suspensions. To date, I've experienced three cuts and three suspensions, reducing my projected annual dividend income by about $1,832. And another planned reduction will reduce my projected annual dividend income to about $1,959 by year-end.
My general approach with dividend cuts or suspensions is to close such positions. However, I've decided not to take any such action until perhaps in December, when I usually consider trades for tax-loss harvesting purposes. Instead, I've sold covered calls to replace most of the lost dividend income.
Introduction
I've been a dividend growth investor since January 2013, when I founded DivGro and invested in my first stock. In 7.5 years of investing, I've collected more than $100,000 in dividend income. Every dividend dollar is reinvested, so I benefit from the compounding effect of earning dividends on stock bought with dividends.
In June 2016, I started trading options to generate extra income and to indirectly... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
EATON VANCE TAX-ADV GLOBAL DIVIDEND OPP FUND 25.20   0.0 0.00 0.00 8.60
SIMON PROPERTY GROUP 155.27   20.8 7.48 8.40 5.21
DOMINION RESOURCES 78.54   53.8 1.46 3.67 4.77
WELLS FARGO 48.65   10.0 4.84 2.04 4.22
TJX 56.75   22.9 2.48 0.92 1.62
WALT DISNEY 137.50   17.3 7.93 1.76 1.30
ROSS STORES 109.36   24.8 4.40 1.02 0.94

EATON VANCE TAX-ADV GLOBAL DIVIDEND OPP FUND - ETO
EATON VANCE TAX-ADV GLOBAL DIVIDEND OPP FUND - ETO  


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