Another one for the Dividend Portfolio:
China Mobile is way too cheap to ignore at $39, which is $159Bn and they pay a lovely $1.95 dividend, so 5% at the moment. Even when you divide by 7 yuan to the Dollar – it's a lovely $105Bn in Revenues and $15.5Bn in profits that are stable, not growing but the p/e is 10 and I don't mind paying that for stability. Most likely, if not for the trade war – they'd be up 10% from here.
| Year End 31st Dec | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | TTM | 2019E | 2020E | CAGR / Avg | |
| CNYm | 630,177 | 651,509 | 668,335 | 708,421 | 740,514 | 736,819 | 734,414 | 746,430 | 767,760 | +3.2% | |
| CNYm | 135,649 | 117,320 | 102,922 | 118,088 | 120,126 | 121,387 | 111,457 | -2.2% | |||
| CNYm | 121,692 | 109,218 | 108,539 | 108,741 | 114,279 | 117,781 | 108,203 | 107,609 | 110,151 | -0.7% | |
| CNY | 29.9 | 26.8 | 26.5 | 26.6 | 27.9 | 28.8 | 26.4 | -0.8% | |||
| CNY | 30.3 | 27.5 | 25.0 | 27.8 | 30.3 | 29.0 | 26.8 | 26.3 | 26.9 | -0.9% | |
| % | -6.2 | -9.2 | -9.0 | +11.2 | +8.7 | -4.3 | -13.5 | -9.26 | +2.24 | ||
| x | 9.50 | 10.3 | 10.5 | 10.2 | |||||||
| x | n/a | n/a | 4.67 | 5.29 | |||||||
| Profitability | |||||||||||
For our dividend plays, we value stability over growth and we've been loving CHL all decade when they hit the low $40s so no reason to pass this up and we will start with (they only have June contract lengths):
- Buy 500 shares of CHL at $39.09 ($19,545)
- Sell 5 CHL June $37.50 calls for $3.20 ($1,600)
- Sell 5 CHL June $42.50 puts for $4.30 ($2,150)
That's net $15,795 and we get called away at $18,750 for a $3,000 (19%) gain in 7 months, but we'll certainly look to roll and keep things going. It's an aggressive put sale but net $38.20 is a price I don't mind paying to be in 2x so I'd rather do a smaller 500-share start with the aggressive puts than 1,000 shares selling the $37.50 puts for $1.40.
Meanwhile, we should catch a $1 dividend in May (only twice a year, May/Sept) for another $500 (3%) so a very nice 7-month return of 22%. Margin on the short puts is just $3,913.24 – so an efficient trade too!
