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Friday, April 26, 2024

Top Trades for Fri, 25 Oct 2019 11:46 – Dividend Portfolio

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Top Trades for Fri, 25 Oct 2019 11:46 – Dividend Portfolio
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Dividends/Pat – Well that's great but please remind me over the weekend so I can do a proper job.  T is the most obvious to me as they pay $2.04 on the $37 price tag so more than 5%.  I don't particularly like them this high in the channel but it's a good, steady payer.  If you want to use options as well, my trade would be:

  • Buy 1,000 shares of T at $37 ($37,000) 
  • Sell 10 T 2022 $35 calls at $4.60 ($4,600)
  • Sell 10 T 2022 $30 puts for $2.95 ($2,950) 

That's net $29,450 and getting called away at $35 ($35,000) makes a nice $5,550 (18.8%) or, if assigned 1,000 more shares at $30, then average entry is $29.275 – which is where we like to buy T anyway.  That will pay $2,040/year for each 1,000-share block in dividends, another 13.8% over two years so a very nice, conservative trade for anyone to add to a portfolio but, again, I'd rather wait for a pullback and, if I REALLY wanted to jump in now, I'd just sell 5 2022 $33 puts for $4 ($2,000) and that's the same $2,000 you'd collect in dividends but a much lower net entry to the downside and, next January, I'd sell 5 more more for the next year's collections (if it hasn't come down low enough to buy and DD and cover).  

I like the REITs but I'm very alone there so it depends how charitable you really are as it's tricky to actually make money on them outside the dividends.

NLY, for example, is $8.83 and the 2022 $7 calls are $2 and the $10 puts are $2.60 (the $7 puts are 0.60 and not worth selling) so net $4.23 is great and they are paying $1 so massive dividend bang for the buck going out but, historically, they have been going down as much as they are paying out each quarter (faster even) so almost certainly you will be assigned 2x at $10 for $7.115 avg and very possible NLY will be around $6.50 unless conditions change with the Fed over 2 years so yes, you will have generated $2 for charity but lost maybe $1 which is efficient and possibly even tax-effective – but it goes against my nature to play that way.

SKT/Bert – That's a good one and so is F.  SKT I thought was ridiculously undervalued.  It already came back a bit but still cheap – that could be a nice earnings play next week.  F is suffering from China but should turn around one day.  

F pays a very nice 0.60 so that's one I can certainly endorse:

  • Buy 1,000 shares of F at $8.68 ($8,680)
  • Sell 10 F 2022 $7 calls for $2.05 ($2,050) 
  • Sell 10 F 2022 $7 puts for 0.85 ($850) 

That's net $5,780 and called away at $7,000 would be a $1,220 (21%) gain and $1,200 in dividends is another 21% for the charity so a very nice set-up in both respects!  The downside is an average entry of $6.39, a 26% discount to the current price is your worst-case – not even including the collected dividends…

M/Pirate – Also a good suggesting but a little more scary than F.  I'm a believer but that doesn't always work out.  

GILD/Yodi – That's a very good one too.  VTR seems a bit expensive to me. XOM I'm not keen on with all the uncertainty ahead.

SIG/Albo – Hopefully they can keep it up.  SIG is a good dividend payer at $1.48 and my hand is sore from banging the table at $12-15 so hard to pay $17 but, since you can sell the 2022 $13 puts for $4.70 – I'd say that's a no-brainer so we could just do that, or we could:

  • Buy 1,000 SIG at $16.95 ($16,950) 
  • Sell 10 SIG 2022 $13 calls for $6.60 ($6,600)
  • Sell 10 SIG 2022 $13 puts for $4.70 ($4,700) 

The net $5.65/share entry makes this a solid 2020 Trade of the Year candidate.  Even called away at $13 ($13,000) is a gain of $7,350 (130%) without the dividends.  Another $2,960 (52.4%) in dividends makes this an amazing play!  

That's so good we're going to put it in a $100,000 Dividend Portfolio, along with F and T above!  Since our intent is never to touch these plays again, it won't take much effort to maintain.

And, by the way, I'm sure some may wonder why we are playing so conservative but that's the attraction.  Our worst-case is being assigned another 1,000 at $13 to average $9.325 on 2,000 shares – barely more than 1,000 shares costs now.

Also, very important note to investors:  I just got off the phone with Thailand and we (Hemp Boca) have been selected to supply their National Health Service with CBD.  We already have Memorandums of Understanding from 3 major hospitals to purchase long-term and we've secured permits and hundreds of acres of farmland to grow on.

That's all great but now we need Millions of Dollars for seeds, greenhouses, equipment, etc.  We have Thai partners who will put up half (including Thailand's Minister of Health) but we need to put up the rest (or our partner share will be whittled down) so if you know ANYONE who might be interested – please let us know. 

You can Email Greg (at philstockworld dot com).  I'm most interested in finding people who are in Asia who speak Thai (we are also working deals in Japan, Vietnam and Laos) and are able to attend meetings over there.  This is a huge opportunity – hopefully we can get right on top of it!