This trade was actually executed on Tuesday 08/09/16. I didn’t get a chance to write about it until today.
Sorry, but no investment thesis process for this trade. I’ve already done that for GPS.
It’s been nearly a year but my original thesis hasn’t changed too much. Of course the stock price has bounced around quite a bit.
Management just announced the next dividend this week, and they decided to keep it at $0.23/share (ex div is 10/03/16). That means that the annual payout in 2016 will total $0.92/share, which is a mere $0.01 (1.1%) increase over the 2015 total. Disappointing to be sure, but it’s been a tough year. At least it’s an increase…
This trade will expire before the ex-dividend date and is nearly equal to the distribution amount.
SPL (Strike Price Logic)
Okay, so I know that last time I said:
My cost basis in the taxable account is $21.69, and really as long as my strike price represents a 5% yield ($18.40/share), I’m very interested in keeping this position rolling.
So this strike price only represents a 4.3% yield at the current distribution (which, as discussed above, isn’t growing very quickly). I obviously loosened that 5% standard quite a bit. Two reasons:
1) It’s still below my cost basis.
2) I’ve realized recently that taxability makes a huge difference when trying to compare cost bases. If I’m assigned, these shares will pay their dividends in my inherited IRA account, safe from Uncle Sam’s grubby fingers.
Also…if you can get a 15% annualized yield and still have near double digit downside protection, you are a happy camper.
Technically my last trade in GPS is still open until 08/19/16, so I’m exposed to 200 shares for the moment. If the share price falls 30% in a week I will probably end up buying 200 shares.
I’m okay with that.