Seeking Alpha
Long/short equity, contrarian, short-term horizon, dividend investing
Profile| Send Message|
( followers)  

Comcast Corporation (NASDAQ:CMCSA)

  • Yield: 1.98%
  • Dividend Amount: $0.11
  • Ex-Dividend Date: December 30, 2011
  • Beta: 1.03

Comcast Corporation, together with its subsidiaries, provides entertainment, information, and communications products and services in the United States and internationally. The company was founded in 1963 and is based in Philadelphia, Pennsylvania.

I am interested in this company primarily for the dividend and the option premium, but there is also a chance the price could fall enough that I end up owning it for longer than planned. Comcast has many desirable features for either a quick one month dividend capture, or holding on longer.

There are many dividend capturing tactics, and I have used many. In this article I will describe one of my favorite and easy to understand methods of making gains through options and dividends. The criteria that I use is that I must be able to sell a call option in either the front, or first back month that is in the money, and with enough premium that I will not mind getting exercised early (which happens often and can be a good thing if the trades are executed correctly).

Strategy:

In combination with my buying the stock and after checking company updates, offer to sell the January $12.50 strike call for $0.52 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, I will look to close out the covered option with a gain of about $0.39. With such a small dividend payment, it is more likely that the stock will NOT get called away before trading ex-dividend. As a result, if the stock does not get called away I stand to make a gain of about $0.63 per share for one month, and much more if I hold for four months.

The current trailing twelve months (ttm) P/E ratio is 16.3. The forward P/E ratio is 15.1. The current book value per share is 17.13.

Revenue year-over-year has increased to $37.94 billion for 2010 vs. $35.76 billion for 2009. The bottom line has falling earnings year-over-year of $3.64 billion for 2010 vs. $3.64 billion for 2009.The company's earnings before interest and taxes are rising with an EBIT year-over-year of $7.98 billion for 2010 vs. $7.21 billion for 2009.

At $23.14, the price is currently below the 200 day moving average of 23.51, and above the 60 day moving average of 22.58.

Looking at the price movement over the last month, the stock has moved higher in price 0.71%, with a change from a year ago of 8.79%.

The stock is performing well when compared to the general stock market up to this point. When reviewed with the S&P 500, the year up to date positive change is 3.43%.

With such a low payout of profits, it appears likely Comcast will be able to continue paying out unless something negative in a big way happens.


(Click to enlarge)

Remember, you must buy a stock at least three business days before the record date (at least one business day before the ex-dividend date) to qualify for a dividend.

My last step (completed before making a trade on the same day) is to check company announcements, and news sources for possible events that may cause the stock price to move. This is especially important during earnings season.

I research the different call options and calculate the expected probabilities based on Beta, Bid, Offer, Volume traded the current day, open interest, and time value / implied volatility. The Options offer some level of protection from down moves in the stock, and provide revenue to cover the times that the options do not fully cover down moves in the stock. Income is not needed from the option Premiums, so a break even from premiums received/stock losses ratio is a win.

I use a proprietary blend of technical analysis, financial crowd behavior, and fundamentals in my short-term trades, and while not totally the same in longer swing trades to investments, the concepts used are similar. Nothing in the article should be considered investment advice, but you may want to use this article as a starting point of your own research with your financial planner.

Source: Comcast Corporation Options Play