DGI Adventure 12-07-16 Sold Cash Secured Put – Starbucks Corporation (SBUX) – $55.00 strike – Dec 23 Expiration

This trade was actually executed on Friday 12/02/16. I didn’t get a chance to write about it until today.

I first went through my investment thesis process back in June when I sold my first put against SBUX shares. Further discussion on the stock and previous trades can be found here and here.

My goal for this post is really just to document the trade.

I have updated the portfolio and income tracker back at the mothership to reflect this position.

Dividend Cycle

SBUX went ex-div relatively recently on 11/15/16, so the dividend won’t be a factor until likely sometime in February. The company just increased the distribution from $0.20 to $0.25/share, which represents a 25% increase! That means they maintain their dividend challenger status and extend their dividend growth streak to 7 consecutive years.

This trade will expire well before the next ex-dividend date and the premium is almost double the current quarterly distribution anyway.

Investment

SPL (Strike Price Logic)

This is a bit higher than my previous strike prices of $52.50, $53.50 and $50.50, but then the company did just raise the dividend by 25%…

Starbucks has plenty of growth in front of it, and it will be hard to get shares at a really deep discount. $55, which under the old distribution represented a 1.5% yield, was kind of a soft ceiling for me before. Now that same price represents a a 1.8% yield. While I’m not ready to move my ceiling all the way up to $66 (1.5% yield with the new dividend), there’s definitely no reason to be afraid of $55.

If these don’t get assigned, I will make sure to revisit the investment thesis’ quantitative case the next time I sell a put.

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