Showing posts with label LVS. Show all posts
Showing posts with label LVS. Show all posts

Tuesday, March 17, 2020

Las Vegas Sands and P/E

https://simplywall.st/news/apple-post/what-is-las-vegas-sandss-nyselvs-p-e-ratio-after-its-share-price-tanked/

M* MoneyMadam
Disclosure:  Long LVS with calls
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Monday, January 27, 2020

Betweem 8.84% and 16.61% return in fewer than 60 days

Giddy - up:   Buying into weakness on four stocks with surprisingly good calls.

Below you will see four covered call tables illustrating the calls I made today on:

NVDA, DOW, SWKS and LVS.












This is good income investing in a down market.  Don't put all you eggs in these baskets.  But, nibbling when you can get good call premiums is worth the risk.

M* MoneyMadam

Long NVDA SWKS DOW LVS with calls





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Monday, August 12, 2019

A case for Selling Calls for the Income Investor

Call income seems to accompany dividends as the best income tools for August.  Bond interest is so low and quality dividend stocks are so expensive.  Therefore, I sell covered calls on existing positions hoping I do not lose too much opportunity by having my stocks called away.

August is a pretty typical month for call expirations.  History tells us 90 percent of calls expire without action and 10 percent are assigned.   In the table below, I have 18 calls with August expiration dates.

As of today, I have 4 in the money which means the current stock price is above the strike price and 14 out of the money where the current stock price is below the strike price of the call. See the table below.



Only one of these stocks does not pay a dividend and that is YELP.  When I realized YELP was not going to perform quickly, I sold a call very close to the current price and my basis and am hoping it is called away which means the call buyer not only paid me a premium for the option but will also pay me the strike price.  That makes me even on the stock and the call premium in my pocket.

Three other stocks have low dividend yields, MSFT, NVDA and SWKS.  I consider a yield low if it is below the 2 year U.S. Treasury yield so SWKS with a yield of 1.99% may not be considered a low yield stock for some.

I like MSFT but with such a low dividend, as an income investor, I am willing to lose part of my position to the call buyer.  I am underwater on NVDA and will hope the China situation improves at some point.  I will continue to sell calls that are close to my basis so that I can unload NVDA in a similar fashion to YELP.

FOUR IN THE MONEY CALLS

The four income money calls are:   MSFT $135, WDC (Western Digital Corp.) $52.50, CVS $57.50, and YELP $34.   Expiration dates are August 16, 2019 except where noted.  My reasons for risking losing these stocks to the call buyer are:

  • MSFT - yield is too low
  • WDC - yield is good but not growing, EPS are less then dividend paid out but growing
  • CVS - (August 23 expiration)stock price is weak, I added to my shares that are underwater, and sold calls against the low buys
  • YELP - no dividend and stock price is not performing as hoped 

The downside of selling covered calls is two fold. one is lost opportunity.  The call buyer was right to pay you the money for the option to buy, they execute the call and then the stock soars and you miss out on the growth.    If you always look back and are cannot afford to lose a favorite stock, don't sell calls against your beloved stock.

The second risk is your shares are on call, the stock price tanks, you would like to get rid of the stock but cannot unless you pay money to buy back the call.   This risk is untenable for an income investor.  We don't pay out, we deposit funds.  The moral is to pick the underlying stock carefully.

FOURTEEN CALLS OUT OF THE MONEY

The 14 out of the money calls are listed below.  Each stock pays a decent dividend and I am willing to keep them.  I am hoping for additional volatility that may allow additional call selling.  But I am not in such a hurry to lose these stocks so I pick strike prices that I think are harder for the stock to attain before the call expires.  Expiration dates are 8/16/2019 except where noted.

  • MSFT - $145 low yield but upside potential for this very well run company 52 week high $141.68
  • COP - $67.50 nice dividend increases of 7+% recently  
  • LVS - $62, $65, $67.50 High yield with enough volatility that strike prices well above my basis are available.
  • M - $23 High yield with an improving balance sheet and very low P/E (price earnings ratio)
  • WSO - $180 Nice yield, with good fundamentals, headline risk due to global exposure provides strike prices well above my basis
  • SWKS - $82.50, $85 Decent yield, good balance sheet, nice volatility, I have been able to sell calls two - three times per year
  • WMT- $115 Walmart does not raise the dividend much and the yield is mediocre, strike prices near the 52 week high of $115.42 pay enough premium to make WMT a hold.
  • WDC - $55 High yield and improving fundamentals
  • SWKS- $81 (August 23 expiration) Decent yield but enough volatility to enjoy call premiums more than once a year
  • RDS.A - $63.50 (August 23 expiration) Very Good Yield, calls available only about once a year and I sell calls on only part of my position always above my basis and hopefully pick a strike price high enough that I am not called away.
  • NVDA- $185 (August 30 expiration) my worst performing stock of the group.  Not enough dividend to care if it is called away.   
In my case 22.22% of the calls are likely to be exercised versus the historical average of 10% but we still have to see what happens the rest of August.  This post illustrates how conservative income investors can use call options to boost their income during a time when quality dividend stocks are expensive and quality bonds are outrageously expensive.

M* MoneyMadam



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Tuesday, July 9, 2019

LVS Las Vegas Sands

While I am out of the office on vacation, I am still making some money.  Calls for dollars.  Here is a trade I made today.   Added a little LVS and sold this call.

         
  7/9/2019 Price on Open Call Expiration   
  LVS $63.00 9/20/2019  
  Cost Basis:   Price on Option Contract Open $63.00  
  Strike Price:   $70.00  
  Call Premium:    $0.85  
  Dividend  Exp ex-div 9/18/2019 $0.770  
       
  Call Yield on Basis   1.35%  
  Call + Dividend Yield on Basis   2.57%  
  $ Gain if Assigned   $8.62  
  Max Return  if Assigned   13.68%  
         




M* MoneyMadam

Disclosure:  Long LVS with calls
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Sunday, November 18, 2018

BIg Yield Portfolio - Can you get more than 5% from Dividend Stocks

A 39 year old successful man doing work for me asked me what I thought he could get in cash flow if he had a million dollars.  My standard view recently is to first remind him that any advice is worth what you pay for it and then to deliver the uninspiring number $50,000.

For someone dreaming to be a millionaire, the realization that safe income from a million dollars is about 5% can be disappointing. You could get a job earning $25 an hour and make that income. I could hear him calculating how many millions of dollars will he need to replace his current income?

  • Dividend Stocks should be one source of income
  • Dividend Stocks can increase dividends
  • Dividend Stocks with revenue growth may be able to increase stock price
  • Always remember Dividend Stocks can decrease in value and decrease or eliminate the dividend

You have worked and saved and now you are retired.  You have a sum of money to invest in the basket called Dividend Stocks.  You don't want to earn $25 an hour, you want to live off of what ever your multiple sources of income can create one of them being your Dividend Stock portfolio.

Can you get more than 5% from a stock portfolio with "Dividend Machine" quality fundamentals? I say yes and here are the stocks I would buy.

In the table below you see a $200,000 portfolio invested in nine stocks.  The stocks are not equally weighted .  The weighted basis uses closing price on Wednesday 11/21/2018.



11/21/2018
Price
Shares
Basis
Div/Shr
Div. Income
Div Yield
LVS
$51.96
481.139338
$25,000.00
$3.00
$1,443.42
5.77%
MAIN
$37.86
660.3275225
$25,000.00
$2.34
$1,545.17
6.18%
MFC
$16.19
1080.914145
$17,500.00
$0.76
$824.08
4.71%
WDC
$46.90
373.1343284
$17,500.00
$2.00
$746.27
4.26%
T
$29.77
839.7715821
$25,000.00
$2.00
$1,679.54
6.72%
NHI
$75.26
332.1817699
$25,000.00
$4.00
$1,328.73
5.31%
CM
$85.74
204.105435
$17,500.00
$4.17
$852.00
4.87%
WY
$26.68
843.3283358
$22,500.00
$1.36
$1,146.93
5.10%
MIC
$39.28
636.4562118
$25,000.00
$4.00
$2,545.82
10.18%



$200,000.00

$12,111.95
6.06%



In order to invest your precious savings, you need to be sure your investment has a good chance of continuing the high income, some chance of increasing the income, little chance of going belly up, and resilient during down times.   In the table below, you will see important fundamentals that I use to pick my Dividend Machines.



11/21/2018
EPS
DIV
DIV INC
D/E Ratio
P/E Ratio
Rev Growth
LVS
$4.80
$3.00
15.38%
1.75
10.6
3.6
MAIN
$3.18
$2.34
8.33%
0.63
10.5
11.04
MFC
$0.92
$0.76
46.15%
0.33
22
11.02
WDC
$2.20
$2.00
0.00%
0.98
24.8
15.62
T
$5.12
$2.00
6.38%
1
5.9
3.88
NHI
$3.67
$4.00
17.65%
0.89
20.4
8.38
CM
$8.60
$4.17
9.31%
0.13
10
3.81
WY
$1.47
$1.36
31.82%
0.71
16
2.14
MIC
$5.55
$4.00
-11.50%
1.12
7.2
5.05


This is an interesting group of stocks. I mostly like the combined yield of greater than 6%.

Measure of Balance Sheet Safety - Debt to Equity Ratio


Next, I like the debt to equity ratios.  None of these stocks seems to be in financial distress.  LVS has the highest D/E ratio at 1.75.   This is higher than 1 but it is within industry standard.  Note WYNN D/E 4.95 as of September 2018 and MGM 2.165 (source Ycharts.)

T has regularly paid down debt and increased equity so their D/E is right around 1.  Competitor VZ carries a debt load of 2.072 (source Ycharts.)

For anyone who looks at this portfolio and thinks these stocks are risky consider their balance sheets.  I like to use D/E ratio but you can delve deeper into the balance sheets of these stocks and be satisfied that this group of stocks is quite safe.

Potential to Continue Dividend Payments - Revenue Growth & EPS greater than Dividend Paid out


Revenue growth starts the funnel to earnings and then dividends.   Finding nine stocks with revenue growth was not easy.   For instance IBM did not make the cut because their revenues growth is not positive.    These stocks all have revenue growth which makes me think there is the potential to continue paying dividends.   We might even find some stock price growth.

We have one stock on the list that is a REIT,  National Health Institutes which looks as if EPS are only equal to dividends paid out.    By law, NHI as a real estate investment trust has to pay out the majority of its earnings.  Many people prefer to use free cash flow for a stock like this.

There are two schools of thought on dividend payout ratio.  The ratio is calculated as how much of earnings are paid out in dividends.  The best of this group is Telephone, symbol T.   Their payout ratio is .39%.

One school of thought on dividend payout ratios is to find a stock that loves to reward its shareholders with income in the form of dividends.   When the company makes money they share it with us.  However, says the other school of thought, when the payout ratio is high, the margin for error is low and could mean a dividend reduction or suspension could happen.

Dividend increases.


One of my mottoes is to retire with income that grows.  I used to tell my clients to go back 20 years and list some of the same expenses you had back then that you have now and you will find they usually double about every 20 years.  That means if you retire today, even as a millionaire, your financial plan has to provide for income increases over time.   Let's look at these stocks from an income growth viewpoint. 

Macquarie, symbol,  MIC cut the dividend in half in February of 2018 and the stock had a concomittment reduction in price.   That is when I bought it and I will add because I like the fundamentals post cut.   It still sports a yield of more than 10% and has returned to having earnings greater than dividend paid out.  Western Digital (WDC) a previously overpriced stock is getting earnings back above the dividend suggesting they may be able to deliver dividend increases. Those two experiences are balanced by MFC with annual dividend growth over the past 3 years of 10 plus %.

If, and that if always a big if, these stocks can continue to deliver strong fundamentals, they should be able to deliver income.

Diversification is always important.  I used my Dividend Machine fundamental screens to select this group of stocks.  I did not try to find stocks in industries where my assets are under deployed.  I use only my Dividend Machine criteria to select these stocks.  See the table below to learn about the industries.


INDUSTRY
11/21/2018
Price
Shares
Resorts & Casinos
LVS
$51.96
481.139338
Asset Management
MAIN
$37.86
660.3275225
Insurance - Life
MFC
$16.19
1080.914145
Data Storage
WDC
$46.90
373.1343284
Telecom Services
T
$29.77
839.7715821
REIT - Healthcare Facilities
NHI
$75.26
332.1817699
Banks - Global
CM
$85.74
204.105435
Lumber & Wood Production
WY
$26.68
843.3283358
Airports & Air Services
MIC
$39.28
636.4562118



This group of stocks ended up heavy in the financial services area.  That is where the value is and with a sniff of interest rates increases, they should be poised for a growth spurt.  Remember insurers function very much like financial stocks.  When interest rates go up, they can get more income from their investments and payout less on their deposits and payouts.

We shall see what happens with this portfolio.  Our millionaire will now have about $60,000 annual income with a chance to grow that income.   I don't know about you, but for most of us an extra $10,000 per year can make a difference.   As always I will track this portfolio and report on it.

M* MoneyMadam


Disclosure:  Long T, NHI, CM, WY, MIC, LVS  expect to add WDC and strongly considering moving some existing positions into, MAIN or MFC. 






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