Alexander & Baldwin (ALEX) is a Hawaii-based, diversified company that makes money three ways:
- Agriculture: A&B grows sugar cane and coffee on 58,840 agricultural acres in Hawaii.
- Real estate: It owns 745 acres in Hawaii that are fully entitled, prime, and valuable. In addition, they own a portfolio of 1.3 million square feet of space in Hawaii (98% occupied), and an additional 6.6 million square feet in Texas, California, Utah, Arizona, Colorado, Washington and Nevada (95% occupied).
- Shipping: They’re also the leading containership freight carrier between Hawaii and the mainland, under the Matson name. Shipping rates are down, but ALEX has reduced overhead, AND added a shipping port in China.
Next years earnings should more than double, from $.90 to $2.00/share, plus the $1.26/share dividend will likely remain the same. (ALEX has confirmed their next $.315/share quarterly payout, payable September 3rd to shareholders of record as of August 6th.
ALEX finished yesterday at $26.89, and currently pays a $1.26/share dividend, for a dividend yield of 4.69%. It'll report earnings on Friday, July 24th, so there may be some interesting volatility in its share price over the next week.
ALEX has run up over 7% this week, so more conservative investors may want to try selling puts against it.
The September $25.00 put, AXBUE, is currently bid at $1.10, which equals a 4.4% nominal yield for just over 2 months, or 25% annualized. This would give you a 25% annualized yield, and a breakeven of $23.90.
Selling the December $30.00 call, AXBLF, currently worth $1.25, would give you a 4.64% nominal yield over 155 days, plus $.63/share in dividends, an additional 2.34% nominal yield.
An additional potentially large profit would also accrue from selling the $30.00 call, if ALEX's share price rises to or past $31.25 around the time of expiration. This would cause your shares to be assigned, (sold), thereby giving you an additional $3.11/share profit, or 11.57%.
Downside Protection/Static Yield : $1.89/share (call + dividend $)
Here's a consolidated table of all the figures:
|Price||Dividends/share (ex-dates before expiration)||Dividend Yield||Call Strike Price||Call Bid Premium||Call Yield||Potential Assigned Yield ($3.11/shr)||Total Potential Yield|
One other note: given the recent "sideways" movement of the market, there's probably a reasonable chance that there may be a pullback in these shares, possibly after or just before their earnings announcement; in which case, the put values would rise and become more attractive.
Disclosure: Author is long ALEX.