3 Dividend Plays for Traders ‘Behind in the Count’
How a baseball mindset can improve your covered-call score.
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Sometimes you have to think of trading as you would playing ball.
Let me explain.
An experienced MLB hitter approaches the plate quite differently depending on the pitch count. A batter ahead in the count 3-0 will sit on his pitch and swing away only if he gets it. The outcomes are favorable. Most likely a hit if the batter makes contact or a hard-hit ball that just happens to go right at the third baseman if bad luck hits. A foul ball, taking a strike or a whiff, just pushes the count to 3-1, which is still a favorable count.
A batter behind in the count 1-2 approaches the plate in a completely different and cautious way. He chokes down on the bat, intent of just putting the ball in play or at least fouling off the pitch.
I approach the market this way. If I believe market valuations are stretched and I am growing increasingly concerned about a potential AI bubble, I am focused on playing “small ball,” as if I am behind in the count.
For this means acting upon the few stocks I am finding in this market that are sporting reasonable valuations for covered-call trades. That way I can produce a solid profit even if my target trades down a tad over the option duration. Not surprisingly, I am finding most of these opportunities in the sectors in the market that are significantly below their historical weightings as tech and tech-related names have dominated the rally in the market that began when ChatGPT debuted on the market in November 2022.
Last Monday and Wednesday I highlighted several covered-call holdings I hold within the Biotech/Biopharma sector. As you can see above energy, real estate and staple are also currently significantly underweight compared to their historical levels. In this article, I will highlight a few solid dividend plays in these sectors that I am boosting the yield around holding within covered call positions.
In real estate I continue to avoid the home builders even as many are trading near their book values. I feel there is still some more pain to come due to the moribund housing market. I think it is likely I will be back in the sector at some point in 2027 at lower entry levels and hopefully some improving trends.
I do hold CTO Realty Growth, Inc. (CTO) as the only real estate investment trust in my portfolio at the moment. The stock has been a steady performer here in 2026 as management continues to upgrade its retail property portfolio. The shares still trade at a reasonable just over 10-times forward funds from operations and they also provide a healthy 7% dividend yield.
In the consumer staple space, PepsiCo. (PEP) is looking more interesting after a recent post-quarterly earnings slide. The business is being hurt by a struggling consumer and higher gas prices. After the recent pullback, the shares trade just under 16-times forward earnings and have a solid 4.4% dividend yield.
Finally, ExxonMobil (XOM) is a good proxy for the energy sector and provides an over 2.8% dividend yield and trades at a reasonable 11-times forward earnings.
These are some ways I’m playing small ball right now.
At the time of publication, Jensen was long CTO, PEP and XOM
