Friday, April 5, 2019

Whirlpool, WHR, Risk losing it to a call buyer

While I like the greater than 3.5% dividend yield, I am not so in love with this stock that I just can't lose it.  I always tell my readers, if you love a stock, especially one that feeds you with a healthy dividend, don't sell calls on it.  You risk having your income called away with the underlying stock.

Whirlpool is not in that category.  Frankly, with the calls I have written (sold) on this stock my income runs about 6% per year.

But, I have suffered through massive stock price changes.  It has been a bumpy ride.  Moreover, if you look at the previous calls, you can see the strike price today is lower than in previous calls.  I really prefer to ladder up instead of down.  But, I am still above my basis on this lot so I am actually hoping WHR is called away.

The table below shows why I am willing to have WHR called away (also known as assigned.)  Revenues and dividends are growing but look at those earnings.  EPS (earnings per share) have taken quite a hit.  WHR wrote off over $9 per share in the second quarter of 2018.

% Change

I sold this call today and it was snapped up quickly.  As I call it, wringing more money out of Whirlpool.

M* MoneyMadam

Disclosure:  Long WHR with calls