My highest conviction trade today in the ‘hold forever’ space is Chevron Corporation (CVX)
music selection: “You Call Me A B1tch Like It’s A Bad Thing” — Halestorm
This is part speculative that oil prices are near a bottom. Either way, Chevron’s downstream assets ensure the company remains profitable at depressed commodity prices. CVX checks out in the shareholder return area. Current yield is 4.6% (tasty!) and distributions have increased for 27 consecutive years. The company also retired 4.4 billion dollars worth of its own stock last year (an extra couple percent yield.) Long term debt is increasing but not to a troubling level (it is still covered and then some by current assets). And the company is still profitable even with depressed oil prices, pulling in net income of 2.5 billion last quarter.
I sold CVX150828P00094000 this morning for 2.82 a contract. The trade will be in force 38 days and yields a very attractive 28.82% annualized. I hope to get assigned so I can begin writing 10% out of the money covered calls against the position. That should yield about 2% over the 4.6% dividend yield and 2% share repurchase yield for a total yield around 9 percent before any capital gains from price appreciation as commodity pricing improves. Paint me a happy lizard.
Devour your prey raptors!