Microchip Technology, (MCHP), is a dividend paying stock listed in the Tech section of our High Dividend Stocks by Sector tables. MCHP's current dividend yield is 4.66%. MCHP is a leading provider of microcontroller and analog semiconductors, and is based in Arizona. The firm recently upped its earnings guidance for Q4 fiscal 2010, from $.34/share to $.42, (non-GAAP), citing stronger bookings and sales. They also expect sales to be up 8%. MCHP reports earnings this coming week, on May 5th.
MCHP recently bought Silicon Storage Technology (SSTI), whose SuperFlash technology is used widely in advanced microcontrollers. MCHP will now be able to embed this technology in its microcontrollers, which is their core business.
Although its debt load is slightly higher than its peers, MCHP’s balance sheet is solid, and this firm fares well overall in our Industry Comparison table.
MCHP’s current PE of 33.19 looks a bit rich vs. its peers. Investors looking to lower their breakeven costs could do so by selling covered calls on MCHP. Our Covered Calls Table currently lists the October $30.00 call option, (QMT\10J16\30.0), for MCHP as having a 16%-plus annualized static yield, and an assigned annualized yield of nearly 23%. Your breakeven cost on this options trade would be $26.98, Friday's closing price of $29.21, minus the $2.23 in call and dividend money from the trade.
An additional strategy for lowering your breakeven cost would be to sell MCHP put options. The October $30.00 put option listed for MCHP in our Put Selling table is currently worth a $3.00 bid, which equals a 10% nominal yield, or 22%-plus annualized. Your breakeven would be $27.00 on this options trade. (These percentages are based upon 100% cash reserve).
Disclosure: No positions in MCHP at this time.
Disclaimer: This article is written for informational purposes only.