Everyone is chasing yield these days. The "Junk Rally" ended in September and the "Quality Rally" is now underway. High Quality Dividend Stocks like Fortis and Enbridge were attractively priced up until August. Now both are near all-time highs. For now, both Fortis and Enbridge are on my watch list.
The question that we have to ask ourselves as rational/value investors is "Do we chase these stocks?" Are you content with a dividend yield under 4%?
A put writing strategy is a good idea, but given the high quality nature of these stocks, you won't be getting much of a premium in return. Judging by the prices that the put options are trading at tells us that there aren't too many investors anticipating a pullback in Fortis or Enbridge any time soon. Maybe things will get cheaper in April.
Your Stock Price Doesn’t Matter
1 hour ago
1 comments:
The Money Gardner wrote on his blog:
I purchased Fortis at an attractive price during the credit crisis and my adjusted cost base (ACB) is $21.73/share. Due to the fact that Fortis has been increasing their dividend regularly and that the share price has risen, my yield on cost (the yield that I am receiving on my initial investment) is 5.2% while the actual yield on Fortis shares today is only 3.9%. So someone purchasing Fortis shares today will receive 3.9% of their total investment in cash annually while I am garnering 5.2% of mine.
So is Fortis still a good buy? Most people I talk to think that $33 is more likely than $25
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