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Stock/Option/Dividend Ideas

Summary

The recent sell-off has created some opportunities.

This blog post details my thoughts on some of them.

Do your own due diligence before acting on any of these ideas.

Olin Corp. (OLN):

OLN is ex-dividend today (May 9, 2019) for its 370th consecutive quarterly dividend, currently 20 cents per quarter.  It's also near a 2.5+-year low, yielding right around 4%, sporting a TTM P/E <10 and EPS of $2.08.  OLN had hit a 6-year low around $12.30 back in early 2016, then shot up to over $37 less than two years later.  I sold $22.50 and $23.50 puts that expired last week, and all the puts were assigned, so I'm collecting the dividend (payable June 10) and writing covered calls on the shares.  There's a weekly options market on OLN but the longer term options only go out about 6 months, so there are no LEAPS available.  You can sell OLN options for good money, but if you should want to buy them back, be aware that, for some reason (which I don't know), ask prices remain inordinately, illogically high even when the options are well out of the money.  There's no dividend growth with OLN but, if you should buy some shares now, you're making around 4%, you can pad those returns with covered calls, and, in my opinion, the dividend is well-covered and in no danger of being reduced or eliminated.  Selling puts ahead of earnings/dividend announcements may get you in at a better price.

Coty, Inc. (COTY):

Beauty products behemoth Coty, Inc. reported Q3 results yesterday which reflected a concerning decline in revenue.  Still, the stock price has remained fairly steady over the past three months, and COTY also announced a regular quarterly dividend of 12.5 cents, ex-dividend on June 5 and payable June 18.  Beginning with this quarterly dividend, shareholders have the option of receiving 100% cash dividends, or 50% cash/50% stock dividends.  COTY is looking to save some cash for debt reduction, without reducing the payout, and estimates it will save $30 million this year, and over $100 million in 2020.  COTY's options market is weekly, so you could sell puts ahead of the ex-date if you want to try to collect the dividend or just some quick cash.  There are also LEAP options, and if you were inclined to write covered calls on shares you bought today, you could potentially make around 20% over the next 8 months selling January 2020 calls along with collecting the 4.3% dividend.  I just did a buy/write on 200 shares, selling one January 2020 $11 call, and one $12 call.

Macy's (M), L Brands (LB), Gap, Inc. (GPS):

Yeah, I get that retail is facing some substantive challenges, but these giants all make money, lots of it, have major on-line presences, pay very nice dividends which appear in no jeopardy, ranging from GPS's 3.8% to LB's 4.9% to M's 6.65%, and have weekly options markets which present many opportunities to add to your gains.  And yet, the "market", in general, seems to hate them.  See my other blog posts for details on how I made some quick gains this year in GPS.  M reports pre-market on May 15, with an anticipated ex-dividend date in mid-June, LB reports around a week later with an anticipated ex-dividend date in late May, and GPS reports around the same time as LB with an expected ex-dividend date in early July.  I have stock and options positions in all of these names.

Altria Group Inc. (MO):

The market is beating MO over the head.  Yes, cigarette volumes are declining.  There's a real push to raise the minimum age for tobacco purchases to 21.  Twelve states have enacted this change, which is supported by both JUUL, MO's vaping arm, and MO itself.  MO's investment in Canadian marijuana purveyor Cronos is also spooking investors.  All well and good.  Concerns?  Yes.  Problems?  Maybe, maybe not.  For me, MO is all about earnings and dividends.  If MO hits their earnings targets, and they normally do, then both the dividend and dividend increases are safe.  MO recently reaffirmed 2019 full-year EPS guidance of $4.15 to $4.27, giving no indication of coming up short, and a dividend boost in September looks likely.  It'll be much smaller than last year's two boosts, probably no more than a penny, but any increase means MO is achieving or exceeding its earnings guidance.  MO's yielding nearly 6.2%, and its meaty options market provides substantial opportunities for limiting risk and increasing gains.  Don't forget, MO owns a big stake in AB InBev (which acquired SABMiller 2.5 years ago), and also produces wine in Washington state, so it's about a lot more than smoking.  Look for MO's next ex-dividend date in the second half of June.  Plenty of time to sell puts to stake out a position before then.  I have stock and options positions in MO.

Best of luck in all your trading and investing endeavors.

Disclosure: I am/we are long GPS, M, MO, LB, OLN, COTY.

Additional disclosure: Also short puts and some calls on all my longs.