Double Dividend Stocks | Aug 17, 2012 01:03AM ET
After getting bashed in the 2nd quarter, Cisco Systems, (CSCO), stock has done well this summer, gaining over 17% since the June lows. CSCO is also one of the top 4 Dow 30 performers over the past trading month, gaining 6.90%, and trailing only Home Depot (HD), Caterpillar (CAT), and IBM (IBM), which leads the Dow pack with an 8.49% gain.
Even with its big summer gains, CSCO still trails the market year to date:
However, using the consensus future earnings growth rate of 8.09%, with a risk-adjusted 10.41% discount rate, shows CSCO’s estimated value to be approximately $23.25, indicating that CSCO is currently undervalued by well over 20%.
However, your Assigned compensation would be much more than the dividends anyway: $1.11 in call premium now, plus $.13 in assigned price gain, for a net gain of $1.24, a 6.57% gain. If your shares were assigned near the October ex-dividend date, in under 2 months, this would equal a 39%-plus annualized yield approximately. Conversely, if your shares are never assigned, the minimum yield you’d make would be a 17.57% annualized static yield.
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