Two high tech companies with steady dividends

These two high tech stocks which you may be interested. Both Microsoft and Intel are DOW components and these two companies have been paying dividends and continue to increase their dividends over the years.

Microsoft current yields is about 2.4% and P/E is 10. Although the stock has been trading in a tight range over the last 10 years (closed at $27.21 as of 9/20), the steady growth of dividend made the stock stand out comparing with IBM and HPQ. IBM pays 1.7%  dividend and P/E is 14, and HPQ pays 2.0% with P/E of 5.38.

Intel is one of the leader in the Semiconductor industry. The chipmaker may not have future surge consumer demand for its CPUs like it was back in the 80s and 90s. The near term demand could still be rough but it continues to lead the CPU market over AMD in PCs and laptops.  Currently, Intel is paying 3.8% dividend with P/E of 10 and the new expected Microsoft Windows 8 release may spark some attention to this giant chipmaker. Intel closed at $21.53 on 9/20.

Established Bull Put Credit Spreads

Established paper trade with a pair of put credit spreads:

1. IWM at $71.80
    Sell put IWM 64 @ .18 expires on 9/23
    Buy put IWM 63 @ .09 expires on 9/23

    Credit: $.09
    ROI before commission: .09/1 = 9%

2. SPY at $121.09
    Sell put SPY 110 @ .19 expires on 9/23
    Buy put SPY 108 @ .13 expires on 9/23

    Credit: $ .06
    ROI before commission: .06/2 = 3%

NFLX bull put spreads options got hammered yesterday

Recently I came across with an option trading strategy named "Vertical Bull and Bear Credit Spreads". The credit spreads would look like this.: I would start with a position in buying and selling the same underline equity options with two different strike prices and same expiration date. By doing this, I created the spread positions. The positions would be either Call or Put but both would be on the same side.  If the price I receive on the sell option is more than the cost that I pay for the buy option, I immediately receive credit in my account. I would profit from this credit if both options expire after the expiration date. This is one of the method I just learned in using options to generate steady income.

I picked up a few stocks such as AMZN, APPL, IBM and NFLX last Friday and paper traded with the Bull Put Spreads hoping the general markets would go up this week. (Bull Put Spreads: Sell a put with near closing striking price and buy a put with lower striking price and receive credits from the difference in prices from these two options).

Everything was going well towards the market open yesterday. Howerver, the positions I established on 9/9 for NFLX was to Sell 10 Puts NFLX 175 at $.66 expires on 9/16, then I bought 10 Puts NFLX 170 at .45 expires on the same date. The stock was trading at $208.53 at the time and I received a credit of $0.21 which was equivalent of $210 ($0.21 x 1000 shares) before commission. I had about 16% cushion on this (208 - 175)/208 = 16% and I thought I would be fine with 1 week left that it will expire on 9/16 (today). Sure enough NFLX was down about $33 before the market open with "bad bad news" yesterday and continued trading in that range during the day and closed at $169.25. So basically I would lose the $5 delta per share in this spreads position if the closing price of NFLX remained under $170 today. It would translate to a $5000 lost ($5 x 10000) . By trying to make $210 and lose $5000 - $210 = $4790, this is a risky business. Well, fortunately this was still a paper trade and I will continue to study more in this area.

Core holding in portfolio

The following stocks and ETFs will be part of my portfolio for dividend income and the combined average yields would be 4.0% as of today.

1. ABT - 3.8% (annual dividend)
2. AGG - 3.30%
3. CVX - 3.30%
4. ED - 4.3%
5. HYG - 8.06%
6. IEF - 2.77%
7. JNJ - 3.6%
8. KO - 2.7%
9. MCD - 2.8%
10. MO - 6.20%

Stay in cash since last post

The major markets have not been doing well entering the 2nd half of July and continued performing poorly except commodities. The simulated Ocean ETF portfolio is still in cash.

I am retiring as systems engineer this Thursday (September 15) after 30 years of working in this field. I am looking forward to do something else and at the same enjoy my retirement. From this point on, I will spend my time in managing my own portfolio by following the stock markets and spend more time with my family.

In managing my own portfolio, I will divide it in the following areas.

1. Dividend income generated from stocks and ETFs from my IRA account.
2. Position, Swing and/or Intra-day trades from my regular account.
3. Options play for added income purpose.

I think it will keep me busy.