With the market alternating between up months and down months since July, many income investors are seeking stocks with less correlation — i.e. dividend stocks which are defensive during pullbacks but still share in rallies. It has become more challenging to find such an animal, but they do exist. However, defensive equities aren’t always the best stocks for growth. These big pharma dividend stocks, Lilly (NYSE:LLY ) and Pfizer (NYSE:PFE ), have both performed well in 2011 vs. the S&P, in up and down markets:

LLY and PFE flip-flopped during the September and November pullbacks and the October rally, performance-wise. LLY got a boost recently, when an analyst suggested that their anti-Alzheimer drug could double the share price, if proven to be effective, which he thought it had a 10-20% chance of.

Dividends:

Financials: Lilly has much stronger metrics than Pfizer, and vs. its big pharma peers.

Options: The call and put options trades listed below expire in April for LLY and March for PFE.

Covered Calls: Although the option yields aren’t as high as other stocks we’ve covered recently, both of the options trading strategies listed below offer you an opportunity to significantly improve upon these stocks’ dividend yields over this 4-5 month period.

(You can see more details on these and more than 30 other high yield covered call trades in our Covered Calls Table .)

Cash Secured Puts: LLY’s put options offer a bit more yield than PFE’s. Given the 17% to 20%-plus gains that PFE and LLY have made year-to-date, selling cash secured puts below the current stock prices might be the most conservative approach you could take in potentially accumulating shares. (Note: Put sellers don’t receive dividends.)

(You can find more details on these and over 30 other high yield options trades in our Cash Secured Puts Table .)

EPS/Valuations: Due to patent expirations, the future sales forecasts are sub-par for LLY and stodgy for PFE. As we mentioned earlier, though, there’s a trade-off between growth and defense in these stocks.

Disclosure: Author has no positions in LLY or PFE at the time of publication.

Disclaimer: This article is written for informational purposes only and isnt intended as investment advice.