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Alexander & Baldwin (NYSE:ALEX) is a Hawaii-based, diversified company that makes money three ways:

  1. Agriculture: A&B grows sugar cane and coffee on 58,840 agricultural acres in Hawaii.
  2. 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).
  3. 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.

Two ways to capitalize on this volatility are: selling covered calls and selling cash-secured puts.

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:

PriceDividends/share (ex-dates before expiration)Dividend YieldCall Strike PriceCall Bid PremiumCall YieldPotential Assigned Yield ($3.11/shr)Total Potential Yield
Nominal Yields$26.89$.632.34%$30.00$1.254.65%11.57%18.56%
Annualized Yields 5.51% 10.95%27.25%43.71%

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.