Corporate Office Properties Trust Dividend Capture ($OFC)
Corporate Office Properties Trust (NYSE:OFC)
Yield: 7.6%
Dividend Amount: $0.41
Ex-Dividend Date: September 28, 2011
Beta: 0.98
Corporate Office Properties Trust, a real estate investment trust (REIT), engages in the acquisition, development, ownership, management, and leasing of suburban office properties. The company was founded in 1988 and is based in Columbia, Maryland.
In this article we will go over an upcoming dividend with Corporate Office Properties Trust 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 Corporate Office Properties Trust stock and after checking company updates, offer to sell the January $20.00 strike call for $0.30 over the intrinsic value. The option may get exercised early for a gain. In almost all cases I will sell the call option first to ensure the stock option leg is complete first. If not, after qualifying for the dividend, I will want to close out the trade near break even.
The current book value per share is 16.94.
Revenue year-over-year has decreased to $564.48 million for 2010 vs. $767.07 million for 2009. The bottom line has falling earnings year-over-year of $42.76 million for 2010 vs. $56.33 million for 2009.The company's earnings before interest and taxes are falling with an EBIT year-over-year of $131.31 million for 2010 vs. $137.93 million for 2009.Lower revenue along with a drop in earnings is often one of the last signs to get out of the way of a falling stock price.
At $21.60, the price is currently below the 200 day moving average of 28.97, and below the 60 day moving average of 22.43.
In the last month, the stock has decreased in price -8.39%, and changing from last year at this time -35.09%.
When comparing to the S&P 500, the year to date difference is -37.73%.
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.
