By Robert Hauver
Although Apple, (AAPL), pays no dividend, and is outside our normal realm of high dividend stocks, one can’t help but be impressed by the stellar numbers they’ve put up during the past 4 fiscal quarters. At a time when many consumer goods firms were struggling, AAPL blew away its year-ago earnings and sales every quarter:
Here are some of the metrics associated with this success:
All of this begs the question – if Apple is up 60% for the past 12 months, is it still undervalued? Here’s a look at its current growth valuation metrics:
AAPL’s current P/E is at the bottom end of its range for the past 5 years, and, its next 5-year PEG is just under 1, the recognized threshold for PEG under-valuation. Of course, with the specter of CEO Steve Jobs’ health issues, many investors might want some downside protection on AAPL, in spite of its strong past earnings and future projections. Many analysts feel that AAPL’s earnings are safe for the next 1-2 years, due to their strong current product mix. They also point to the experience and talent of the AAPL management team that Jobs has put together, as further reason for stability in the near-term future.
Here are 2 defensive ways, via selling put and call options, that you could earn double-digit yields from AAPL over the next 12 months:
1. Selling Covered Calls:
The above covered call options trade gives you a break-even of $290.69, which is approx. only 2.5% above AAPL’s 200-day moving average. In addition, you’d benefit somewhat from potential price gains.
There are further details in our Covered Calls Table.
2. Selling Cash Secured Puts:
Selling this cash secured put option gives you a very similar break-even point, $290.90. However, there are many other lower strike prices that would, in turn, give you a lower break-even, but a lower yield also. There are further details on the above trade in our Cash Secured Puts Table.
Disclosure: Author is short AAPL puts
Disclaimer: This article is for informational purposes only, and isn’t intended as investment advice.