Tuesday, May 31, 2016

Why add Gentex GNTX in 2016

A Gentex auto-dimming car mirror.
A Gentex auto-dimming car mirror. (Photo credit: Wikipedia)
Update 6/2/2016  Please note that the ex-dividend date for GNTX is July 5, 2016 not July 20, 2016.  July 20 is the pay day.

Actual execution of this trade was $16.35 basis, selling the September $17.50 strike for a call premium of $.35.

Gentex, symbol GNTX, meets almost all the criteria I need to add it to the 2016 portfolio.  Sadly, I cannot add to the model portfolio because the dividend yield is less than the 2.75% I require, but I am going to add to my personal portfolio and here is why.

Gentex, GNTX, is a solid stock running under the radar of most investors.  In this post I present GNTX’s dividend yield and growth, earnings per share and revenue growth, debt to equity ratio as well as covered call options.

This table presents GNTX’s 2016 criteria:


Gentex has paid dividends since 2003.  The stock split 2:1 twice since it started paying dividends; 2005 and 2015.  Adjusted for splits, dividend increases have averaged 10.45% per year between 2010 and 2015.  The most recent declared dividend of $.09 for shareholders as of July 20, 2016 is a yield of 2.17% (closing price on 5/21/2016 $16.57.)


As you know, I always require earnings per share to be greater than dividends paid out.  GNTX meets that criteria.  During the last four quarters, EPS were $1.10 and dividends were $.34.  Revenues drive earnings and earnings drive dividends so revenues are important. 

Between 2012 and 2015 revenue growth has averaged 13.47% per year.  In 2012 revenues were $1,099 and in 2015 $1,543.  The revenue growth is solid.


There are many ways to measure a company’s financial strength.  I use D/E (debt to equity ratio.)  I expect no more than a D/E ratio of 1 or equal to industry standards.  Anything more than 1 is troubling.  GNTX sports a D/E ratio of .1194.  This low ratio means GNTX carries very little debt.


With the meager yield of 2.17%, I need to boost my current income from this investment.  I think it will continue to grow and we all know how hard it is to find a stock with solid revenue growth in this market.  If GNTX continues to grow, it is highly likely that covered call options will be available.  

A few September $17.50 calls traded today with a premium of about $.35.  The September call is a little further out than I like to go, therefore, I will monitor the situation and when I find the right call, and it may be tomorrow, I will sell a call on half my position.  The table below presents the potential gain from selling this call.

Gentex has a market capitalization of $4.791 billion which is not that large.  Often times companies of this size are dependent on only a few big suppliers.  Lose one contract and you can have trouble.  Be forewarned that a smaller cap stock, even one with the solid history of GNTX can be vulnerable to a customer’s ups and downs. 

Consider Gentex, GNTX, for the income producing portion of your portfolio.

M* MoneyMadam

Disclosure:  Expect to add GNTX and expect to sell calls

WFC Best of breed

I agree with this. M*

Wells Fargo: Simply The Best-Of-Breed Large Bank http://seekingalpha.com/article/3978565?source=ansh-d $WFC, $BAC, $C, $JPM, $PNC, $USB

Tuesday, May 24, 2016

2016 Portfolio Update MSFT

I added Microsoft, MSFT, to my 2016 Portfolio Feb. 16, 2016 at $50.40.  Click here for portfolio details.  

Portfolio update: today I sold a covered call: strike price $55; expiration August 19, 2016; call premium  $.80 per contract.   Call details are in the table below.

M*MoneyMadam  Disclosure:  Long MSFT with calls

Caterpillar Free Cash Flow

If you are long Caterpillar or thinking about it, you should read this article. Caterpillar Free Cash Flow M*MoneyMadam

MSFT, MCHP, CAT More calls for more income!

Readers of this blog know I use covered calls extensively to boost my income.  What is a girl to do with interest rates so low and with dividend stocks being priced high?  I still think the best income investing during these times is to use high quality dividend stocks with covered call potential.


Among the many stocks on which I tried to sell calls today are these three:  Caterpillar, Microchip Technology and Microsoft.  I have owned them all for a long time.  As a matter of fact, Microchip (MCHP) was the very first Dividend Machine I wrote about in late 2010.

English: Wheel loader (front end loader) made ...
English: Wheel loader (front end loader) made by the Caterpillar company. (Photo credit: Wikipedia)
Caterpillar is so very weak.  I added a little last October.  I am working those shares for income with calls.  I am reinvesting the dividend on my other shares, with a higher basis, as it is too late to sell them and the yield of 4.4% is good.   I don't want to add anymore CAT because their EPS are less than the dividend ($.46 versus $.77) and because their revenues have collapsed ($47,011m in 2015 versus $65.875m in 2012.) 

Here is the CAT call I sold today:

Microchip Technology on trade fair Embedded Wo...
Microchip Technology on trade fair Embedded World a few minutes before opening the fair, Nuremberg, Germany 2008 (Photo credit: Wikipedia)
Microchip Technology, in an effort to grow, has acquired other companies and used debt to do it.  A 1.13 D/E ratio is too high for me.  Intel, for instance, has almost no debt.  MCHP is not so bad a company that I need to sell it.  Indeed, they are working through this acquisition.  However, their dividend growth rate is so meager I will sell calls with strike prices close to the current trading price hoping the call buyer will take my shares and I can move into a higher yielding stock.

Here is the MCHP call I sold today:

Microsoft is a good dividend stock. MSFT actually meets all my fundamentals.  However, it is expensive.  MSFT sports a P/E (price to earnings ratio) of 40.  Note that AAPL has a P/E of only 10.85. 

WELCOME TO Microsoft®
WELCOME TO Microsoft® (Photo credit: Wikipedia)
MSFT just barely meets my dividend yield criteria of 2.75%.  At today's price of $51.40 ish their yield is 2.88%.  I need more than 2.88 so I am supplementing my income with calls.

Here is the MSFT call I sold today:

This post is another example of how to your dividend stocks to create more income.


Disclosure:  Long all with calls