The Hershey Company (HSY) Yield: 2.46%
Dividend Amount: $0.34
Ex-Dividend Date: November 22, 2011
Beta: 0.27
The Hershey Company, together with its subsidiaries, engages in manufacturing, marketing, selling, and distributing various chocolate and confectionery products, pantry items, and gum and mint refreshment products worldwide. The company was founded in 1893 and is based in Hershey, Pennsylvania.
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 $55.00 strike call for $0.43 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 $0.25.
The current book value per share is 4.12.
For the same fiscal period year-over-year, revenue has improved to $5.67 billion for 2010 vs. $5.30 billion for 2009. The bottom line has rising earnings year-over-year of $509.80 million for 2010 vs. $435.99 million for 2009. The company's earnings before interest and taxes are rising with an EBIT year-over-year of $905.30 million for 2010 vs. $761.59 million for 2009.
At $56.75, the price is currently above the 200 day moving average of 56.05, and below the 60 day moving average of 58.34.
In the last month, the stock has decreased in price -6.11%, with a change from a year ago of 17.94%.
With a double digit gain compared to stocks in general, the stock shares did very well as compared to the overall stock market. When comparing to the S&P 500, the year up to date change is 19.50%.
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.
