Today marks part 2 of an 8 part series.

music selection:  “Unreal” — Amaranthe

I previously covered ABBV, ADP, and CL, and the series continues in more or less alphabetical order.

The Clorox Company (CLX) was founded in 1913 to make industrial strength bleach from the salt in San Francisco Bay.  It is now organized in four segments: Cleaning, Household, Lifestyle, and International.  Some leading products include Brita water filters, Burt’s Bees line of products, and Clorox wipes.  Ninety percent of the company’s brands are number one or number two in their market.  The company is a dividend raiser and more than doubled its distribution from 2007 to 2013 increasing from 1.20 to 2.84.

The company has manageable long term debt.  It gushes free cash flow and pays over fifty percent thereof back to shareholders as dividends.  It is also buying back stock.  Current dividend yield is 2.41 percent.  The near the money strike, CLX160318P00125000, is currently yielding 23.36% annualized.  A good return on a rock solid company that has been around for a century and should be for a century more.


Cisco Systems, Inc. (CSCO) is a favorite put writing candidate here at the raptor as it is one of the Big Cheap Tech names.  The company is sticky in that as customers adopt its technology, it becomes increasingly difficult over time to switch to a competitor.  A key segment, routers, saw 11% year over year growth recently.  It is currently yielding a tasty 4.14% dividend.

Long term debt is more than covered by cash and short term investments so this company can be thought of as carrying no net indebtedness.  It is very safe.  The company is kicking off over 11 billion in free cash flow a year.  More than half of that is returned to shareholders via dividends and share buybacks.  There have been six dividend raises since 2011 and there are likely more to come for this dominant market player.

Near the money puts such as CSCO160401P00025500 are currently yielding 27.36% annualized.  I currently recommend going out of the money for some downside protection (the market is guilty until proven innocent in my eyes) but this shows the yield power of this big name.


The third company in today’s list is CVS Health Corporation (CVS).  This is a real power player in the retail pharmaceuticals space.  I like this one long term as a play on the aging Baby Boomers.  The company has over 7,300 pharmacy locations in the United States.  It is the number one provider of prescriptions in the US and is the leading employer of pharmacists and nurse practitioners.  The company went on a buying spree in 2006 and has begun to digest those purchases and realize cost efficiencies.

The company produces a little over 6 billion in free cash flow annually.  It has a conservative 26 percent dividend payout ratio (versus free cash flow) and yields 1.77%.  The company is also buying back shares.  Near the money puts such as CVS160401P00095000 are yielding 18.36 percent on an annualized basis.  That is a strong return on what is ordinarily a sleepy industry.

Devour your prey raptors!

Twenty Four Blue Chip Put Writing Candidates – Part 2 of 8

Never miss another opportunity to devour prey!

2 thoughts on “Twenty Four Blue Chip Put Writing Candidates – Part 2 of 8

  • February 18, 2016 at 4:49 am
    Permalink

    It’s interesting that CSCO is on so many DGI radars. I think the company as a whole is great company but it has a very short dividend paying history and if you go back to the 90’s, CSCO was being split 1000 ways! It’s hard for me to back them like a lot of others have with that in the rear view mirror. What’s to stop that from happening again if they run into trouble?

    We’ll have to see!

    -Dividend Monster

    Reply
    • February 18, 2016 at 3:04 pm
      Permalink

      You make a good point but I think CSCO has a strong moat in that its enterprise products are very sticky. Switching costs are high and recurring revenue is strong. Thanks for reading!

      Reply

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