This trade was actually executed on Friday 12/02/16. I didn’t get a chance to write about it until today.
My goal for this post is really just to document the trade.
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.
SPL (Strike Price Logic)
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.