An Energy Dividend Stock WIth High Options Yields

by Robert Hauver

Energy Services stock Halliburton, (HAL), has risen over 18% in 2013, and is up nearly 35% since the November 15th lows. This is in spite of the fact that HAL recently posted 4th quarter 2012 earnings that were 32% lower than 2011 4th quarter earnings.

HAL’s 2012 full year earnings fell in its biggest region, North America, but rose in its other regions:

HAL-REGION

What are investors seeing? Analysts are predicting nearly flat 2013 sales, BUT, they’re forecasting 2014 sales to rise substantially, up 32%, which gives HAL a very low .42 2014 PEG ratio:

HAL-PEG

Dividends: HAL is certainly not a high dividend stock – it has kept its quarterly dividend at just $.09 since 2007, and yields under 1%:

HAL-DIV

High Options Yields: However, you can still earn good income from HAL, via selling options. We’ve listed below a short term trade for HAL, from our free Covered Calls Table. This April $41.00 call option pays over 18 times HAL’s quarterly dividend amount:

HAL-CALL

With HAL being so near its 52-week high, you may want to consider a more defensive way of trading it. Like selling covered call options, selling cash secured puts gives you immediate income, and a lower break-even cost, if you sell them below or close to the stock’s share price.

HAL-BETA

You can find more details on this and over 30 other put trades in our free Cash Secured Puts Table. The put income for this April trade is higher than the call income, and this put also pays much more than HAL’s quarterly dividend. (Note: Put sellers don’t receive dividends – we only list them on our tables for comparison.)

HAL-PUT

Financials: Although it has a lower Operating Margin, HAL’s Mgt. efficiency and Debt ratios are better than its industry’s averages.

HAL-ROE

Disclosure: The author held no Halliburton shares at the time of this writing.

Disclaimer: This article was written for informational purposes only and isn’t intended as investment advice.

3 Basic Materials Dividend Stocks Trouncing The Market

By Robert Hauver

Basic Materials had been getting pummeled in 2012, for a number of reasons, chiefly the slowdown in the world economy, particularly China, and a strong dollar. This sector is the worst performing sector so far, down 0.6% in 2012:

However, over the past month, this sector has outperformed all others, thanks to a falling dollar, and renewed stimulus from the Chinese government.  Click here to read more…

Halliburton – An Undervalued Blue Chip Dividend Stock

By Robert Hauver

Looking for undervalued dividend stocks? Energy stocks have emerged as the Rodney Dangerfields of the market in 2012, being the only sector that’s still down, (-2.92%), after this new summer rally. However, the sector has pulled an impressive reversal, gaining over 8% since the June 4th lows. Halliburton, however, hasn’t joined in the fun yet, losing -1.52% since June 4th, and is now down almost 14% year-to-date, as of 7/6/12:

HAL-PERF

In addition to being in an out of favor sector, Halliburton’s 2012 earnings are flat, but, if you look to 2013, the picture gets brighter – HAL’s EPS is estimated to grow at over 10%.  Couple this with its historically low range P/E of 8.72, and you have undervalued growth.  We also ran a discounted model for future Earnings growth, with a risk-free rate of 13%, and came up with an intrinsic value of $61.00 for Halliburton.

HAL-PEG

Option trading strategies vs. dividends: Although HAL isn’t listed in our High Dividend Stocks By Sector Tables, it does have some high options yields.

The covered call trade listed below expires in October, and offers a call option premium of $1.68, over 18 times the dividend amount. Since the $30.00 strike is $.93 over HAL’s current strike price, there’s an additional potential assigned yield of over 11% annualized.

Click here to read more…

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Author: Robert Hauver © 2012 Demar Marketing All Rights Reserved

Two Oversold And Undervalued Blue Chip Energy Dividend Stocks

By Robert Hauver

The market’s big multi-month rally may have you wondering if there are any oversold and undervalued dividend stocks left.  The Basic Materials sector has lagged the other sectors over the past year, and is also next to last in appreciation year-to-date, but has shown more signs of life this past week.

The Oil & Gas Equipment & Services industry within this sector has two dividend paying stocks that look oversold and mostly undervalued: Halliburton, (HAL), and Schlumberger, (SLB).  Halliburton’s P/E of 10.31 is near the low end of its 5-year P/E range of 6.24 – 23.52, while SLB’s P/E of 19.87 is closer to the upper part of its 5-year range of 9.58 – 24.97.

As the 2 premier stocks within this industry, both of these stocks usually command a premium Price/Book, but they’re both undervalued on a PEG ratio basis. HAL had strong EPS growth in its most recent fiscal year and quarter, and is projected to have strong growth in its next fiscal year. SLB has a much higher P/E, but also had strong sales and EPS growth in its most recent quarter, and is forecast to have over 22% EPS growth in its next fiscal year:

HAL-SLB-PEG

Share Performance: Like many other Basic Materials stocks, both of these stocks are down considerably over the past 12 months. They’re also way down from their 52-week highs, and have low Relative Strengths of below 40, indicating that they’re starting to enter the upper regions of oversold territory:

HAL-SLB-PERF

Dividends: Both firms managed to maintain their dividends during the 2008 crisis, and Schlumberger increased its quarterly dividend in 2012, to $.275/share, from $.25.

HAL-SLB-DIVS

Covered Calls: Although these certainly aren’t high dividend stocks, they both have high options yields that dwarf their dividend yield.  We’ve listed 2 different covered call options trades for HAL, to illustrate how you can tailor option trading strategies to meet your market bias, be it conservative or aggressive. When you sell covered call options at higher strike prices, you receive lower premiums, but you leave more room for potential price gains.

The first HAL call is more defensive: It has a strike price of $33.00, and its call bid premium of $3.35 is over 18 times HAL’s 2 dividend payouts during this 7-month term.  However, since the call strike price and the stock price are equal, the $33.00 call options leave no room for potential assigned yield, (price appreciation).

The second HAL trade is more bullish: It has a $34.00 strike price, which leaves you the potential for a $1.00/share price gain, but its call bid premium is only $2.88, $.47/share less than the $33.00 call option.

(You can find additional details for this and over 30 other high options yields trades in our Covered Calls Table.)

HAL-SLB-CALLS

Cash Secured Puts: Experienced traders also sell cash secured put options as a way to earn a profit now from stocks that they want to accumulate.  By selling a put, you’re obligating yourself to potentially have to buy a stock at a given put strike price by expiration, if the stock goes below that strike price. Like call options, you get paid a put premium within 3 days of making the trade, (often the same day), as opposed to waiting for quarterly dividends and possible price gains.

Generally, most stocks aren’t assigned or “put” to you until sometime near their expiration date. The reason for this is twofold:

1. Put option buyers will mostly end up selling their open puts, instead of exercising them. They may not want to allocate the cash needed to actually buy the shares and then sell/put them to a put seller.

2. Option buyers want to capitalize as much as possible on the potential price appreciation of the options.

The SLB trade listed below is more conservative than the HAL  trade, in that its strike price is below SLB’s $68.69 price/share.  This gives you a break-even that’s fairly close to SLB’s 52-week low of $54.79.  SLB’s November $67.50 put options pay over 7 times what its dividends pay for the next 8 months.

You can find more details on these and over 30 other high yield Cash Secured Puts trades in our Cash Secured Puts Table.)

HAL-SLB-PUTS

Financials: Both firms’ financial figures are superior to industry averages, except for operating margins, where the industry averages appear to be skewed higher, mostly by much smaller companies:

HAL-SLB-ROE

As the market starts to realize that these oil & gas service firms are able to quickly reallocate their resources to high demand areas, HAL and SLB may be two of the best stocks to buy for price gains.

Disclosure: Author is short Haliburton put options.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Author: Robert Hauver © 2012 Demar Marketing All Rights Reserved