QCOM has been off my radar recently due to their debt. Qualcomm broke out a few months back when some lawsuits were settled and QCOM was able to pursue acquisitions. Take a look at the fundamentals I use for my first screen of a stock and you will be see some good metrics, but also one point of concern.
Let's look at their debt with one measure which is D/E ratio knows as debt to equity ratio. This is the point of concern. Presented in the table below are their most recent four quarters of D/E ratio which shows QCOM managing the debt reasonably well.
Another measure is to see if QCOM can continue to pay down that debt is cash flow; not just earnings but cash flow. In the chart below you can see their most recent quarterly cash flow versus liabilities. It appears they have adequate cash flow to pay their obligations but cash flow is volatile lately.
With that caveat in mind, I am adding to QCOM today and selling this call. I selected an expiration date after the next ex-dividend date of 3/4/2020. I selected a strike price that will deliver a reasonable gain pretty quickly; in 33 days. The table below presents the call as I executed today.
Take a look at how the call worked out today and then use the interactive call calculator to determine how the call return would look for the expiration, strike and premium you might use.
Income investing is very challenging in this low interest rate environment. Very hard for seniors. We have to go out on the risk curve meaning we need to be in equities to get any sort of income. Right now we use dividend stocks and sell calls on those.
M* MoneyMadam
Disclosure: Long QCOM with calls
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QCOM | Earnings | Dividend |
Earnings > Dividend | $3.62 | $2.48 |
Debt to Equity | 3.25 | |
Dividend Yield | 2.87% | |
3 Yr. Rev. Growth | 1.10% |
Let's look at their debt with one measure which is D/E ratio knows as debt to equity ratio. This is the point of concern. Presented in the table below are their most recent four quarters of D/E ratio which shows QCOM managing the debt reasonably well.
DATE | LONG TERM DEBT | SHAREHOLDER'S EQUITY | DEBT TO EQUITY RATIO |
9/30/2019 | $13.44B | $4.91B | 2.74 |
6/30/2019 | $13.43B | $5.46B | 2.46 |
3/31/2019 | $15.41B | $3.87B | 3.99 |
12/31/2018 | $15.39B | $3.62B | 4.25 |
Another measure is to see if QCOM can continue to pay down that debt is cash flow; not just earnings but cash flow. In the chart below you can see their most recent quarterly cash flow versus liabilities. It appears they have adequate cash flow to pay their obligations but cash flow is volatile lately.
With that caveat in mind, I am adding to QCOM today and selling this call. I selected an expiration date after the next ex-dividend date of 3/4/2020. I selected a strike price that will deliver a reasonable gain pretty quickly; in 33 days. The table below presents the call as I executed today.
Stock | Price on Open | Call Expiration |
QCOM | $86.34 | 3/6/2020 |
Cost Basis: | 2/3/2020 | $86.30 |
Strike Price: | $94.00 | |
Call Premium: | $1.25 | |
Dividend | 3/4/2020 | $0.620 |
Call Yield on Basis | 1.45% | |
Call + Dividend Yield on Basis | 2.17% | |
$ Gain if Assigned | $9.57 | |
Max Return if Assigned | 11.09% |
Take a look at how the call worked out today and then use the interactive call calculator to determine how the call return would look for the expiration, strike and premium you might use.
Income investing is very challenging in this low interest rate environment. Very hard for seniors. We have to go out on the risk curve meaning we need to be in equities to get any sort of income. Right now we use dividend stocks and sell calls on those.
M* MoneyMadam
Disclosure: Long QCOM with calls