Nu Skin Enterprises, Inc. (NUS) Yield: 1.32%
Dividend Amount: $0.16
Ex-Dividend Date: November 22, 2011
Beta: 1.20
Nu Skin Enterprises, Inc. develops and distributes anti-aging personal care products and nutritional supplements worldwide. The company was founded in 1984 and is headquartered in Provo, Utah.
Investors can read about many dividend capturing strategies, most of them work better on paper than they do in practice. I tried just about everything over the years, and I learned quickly it is better to use a sim account first. I generally hold the position for about three weeks. Now I use a few methods that produce consistent results. With the gains made, I am able to stop out and take a loss with the few that do not work out as planned. Covered call dividend capturing is an easy to understand method of making gains with dividend capturing. I use options to partially hedge my carry risk during the time needed to qualify for the dividend. Although much of the gains will come from dividends, it should be noted in my experience, the option decay can provide a return. This is especially true in lower yielding stocks.
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 $45.00 strike call for $0.17 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, I will look to close out the covered option with a gain of about about $0.13.
The P/E ratio has been recently discounted, as the current trailing twelve months (ttm) P/E ratio is 22.5, while the forward P/E ratio is now 18.7. The current book value per share is 8.66.
The company has rising revenue year-over-year of $1.54 billion for 2010 vs. $1.33 billion for 2009. The bottom line has rising earnings year-over-year of $136.05 million for 2010 vs. $89.85 million for 2009. The company's earnings before interest and taxes are rising with an EBIT year-over-year of $217.06 million for 2010 vs. $147.71 million for 2009.
At $49.16, the price is currently above the 200 day moving average of 37.44, and above the 60 day moving average of 44.16.
From a month ago, the stock has increased in price 10.40%, and moving in price 59.70% from one year ago.
The stock is performing extremely well when compared to the general stock market up to this point. When comparing to the S&P 500, the year up to date positive change is 61.04%.
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.
