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| 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:
DIVIDEND STORY
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.)
EARNINGS AND REVENUE
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.
DEBT to EQUITY RATIO
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.
COVERED CALL OPTIONS
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
