albo October 27th, 2015 at 10:50 am | Permalink |
Phil -Good article on the reason to buy IBM. Pretty much agrees with your outlook for the company.
http://www.gurufocus.com/news/369429/dont-buy-ibm-to-sell-its-about-the-dividend-income
Snippet on how rapidly IBM has been raising their dividend. Still only has a payout ratio of ~28% :
~~"This brings me to a specific discussion about IBM and its dividend history. This blue-chip stalwart has paid its stockholders a dividend every year, in fact, every quarter, since 1916. Moreover, it has increased its dividend for the past 20 consecutive years at a rate of approximately 15% per annum."
Interesting that there's no mention of Watson or the cloud. IBM's cloud business now accounts for more than 10% of revenues, and grew 65% over the last 9 months. And we know what you think of Watson's potential.
Would appreciate your input on a new BCS given current prices. Thanks. BTW, anyone who buys the stock before Nov. 6 receives 5 dividends over the next 13 months.
IBM/Albo - Can't argue with that. Still my leading candidate for Stock of the Year - 2016.
At the moment, the IBM play would be:
- Sell 20 IBM 2017 $125 puts at $8 ($16,000)
- Buy 20 IBM 2018 $125 calls for $21 ($42,000)
- Sell 20 IBM 2018 $150 calls for $11.75 ($23,500)
That spread would be net $2,500 with the obligation to own 2,000 shares of IBM at net $126.25 ($252,500) so $126,250 in ordinary margin with the potential upside of $47,500 at $150, which is up just $8.50 (6%) from where IBM is at the moment. Per ToS, the net margin on 20 short 2017 $125 puts is just $25,000, so this is super-efficient, as long as IBM behaves itself - especially considering the margin obligation goes away next Jan if IBM just holds $125 (down 11%).
