“E.I. du Pont de Nemours & Co. (DD – yield 3.80%)—DuPont, the large chemical company, has long frequented the ranks of high-dividend stocks. Its current yield [is almost] 4% per year ($1.64 annual dividend per share). The company’s earnings are very sensitive to the health of the world’s economies. Current S&P earnings estimates for 2011 are double what DuPont earned in 2009, although that may prove to be too optimistic. Even so, earnings are far higher now than they were in 2002-2005, when the share price was similar to where DuPont trades now.
“Downside risk in the event that the market decline extends further would be $34/share. However, given the share price history in the chart, the current price (area of $41/share) appears to be a reasonable area in which to open covered call positions. The stock is attractive for that because its options are expensive. The third quarter earnings report is scheduled for Tuesday, October 25. That makes it likely that November options will be pricey after the expiration of October options. Recommendation: Buy DuPont at $41/share or lower.”
Dr. Marvin Appel and Gerald Appel, Systems & Forecasts, 10/6/11
