Brinker International, Inc. Dividend Capture ($EAT)
Brinker International, Inc. (EAT) Yield: 2.81%
Dividend Amount: $0.16
Ex-Dividend Date: December 07, 2011
Beta: 1.42
Brinker International, Inc. owns, develops, operates, and franchises various restaurant brands primarily in the United States. It operates the restaurants under the Chili�s Grill & Bar and Maggiano's Little Italy brand names. The company was founded in 1975 and is based in Dallas, Texas.
There are several dividend harvesting approaches. Some are better than others. The trick is to minimize the amount of risk, and still have an edge. This is one of my favorite and easy to understand methods of making gains with options and dividends. I get asked often how long I normally hold the position before closing out. On average I enter into a position with the idea I may hold it for a month with the current numbers here.
In this article we will go over an upcoming dividend that I may capture with a minimum amount of risk. The criteria that I use is that I must be able to sell a call option in either the front, or first back month that is in the money, and with enough premium that I will not mind getting exercised early (which happens often and can be a good thing if the trades are executed correctly).
Strategy:
In combination with my buying the stock and after checking company updates, offer to sell the December $12.50 strike call for $1.45 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, I will attempt to close out the trade with a gain of near $0.16.
The current trailing twelve months (ttm) P/E ratio is 14.3 The forward P/E ratio is 12.4. The current book value per share is 4.72.
The company has falling revenue year-over-year of $2.76 billion for 2011 vs. $2.86 billion for 2010. The bottom line has rising earnings year-over-year of $141.06 million for 2011 vs. $137.70 million for 2010. The company's earnings before interest and taxes are rising with an EBIT year-over-year of $205.42 million for 2011 vs. $154.50 million for 2010.
At $22.86, the price is currently below the 200 day moving average of 23.61, and above the 60 day moving average of 22.07.
From a month ago, the stock has decreased in price -0.66%, with a one year change of 13.81%.
It is clear to see the stock is performing much better than the overall market with a relative double digit gain. When comparing to the S&P 500, the year to date difference is 14.91%.
Remember, you must buy a stock at least three business days before the record date (at least one business day before the ex-dividend date) to qualify for a dividend.
My last step (completed before making a trade on the same day) is to check company announcements, and news sources for possible events that may cause the stock price to move. This is especially important during earnings season.
I research the different call options and calculate the expected probabilities based on Beta, Bid, Offer, Volume traded the current day, open interest, and time value / implied volatility. The Options offer some level of protection from down moves in the stock, and provide revenue to cover the times that the options do not fully cover down moves in the stock. Income is not needed from the option Premiums, so a break even from premiums received/stock losses ratio is a win.
I use a proprietary blend of technical analysis, financial crowd behavior, and fundamentals in my short-term trades, and while not totally the same in longer swing trades to investments, the concepts used are similar. Nothing in the article should be considered investment advise, but you may want to use this article as a starting point of your own research with your financial planner.
