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Want a Dividend on Non-Dividend Paying Apple (AAPL)? Do This...

March 16, 2012 1:24 PM EDT Send to a Friend
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So you're an income fund manager and have watched Apple (Nasdaq: AAPL) skyrocket but couldn't participate because the stock pays no dividend? Well, your ship may have finally come...

Option strategists at Goldman Sachs list four non-dividend paying stocks that should be bought by income manager using buy-write strategies. In fact, income managers are increasingly using this strategy to transform non-dividend paying stocks into income generating assets, according to Goldman.

Goldman notes that non-dividend yielding stocks make up about 20% of the stocks in the S&P 500 and 11% of the stocks in the Russell 1000 Value. Income managers can expand their "yield" universe by using buy-writes on these stocks.

The firm sees the top buy-writes for income funds as Apple (Nasdaq: AAPL), eBay (Nasdaq: EBAY), GM (NYSE: GM), and EMC (NYSE: EMC). Income fund managers should buy the stock and sell 1-year calls on these.

  • For Apple, you can buy the stock at $586, sell Jan-2013 $720 strike calls and collect a premium of $25.05. This could yield 4.3% in 10 months.

  • For eBay, you can buy the stock at $36.83, sell Jan-2013 $45 strike calls and collect a premium of $1.53. This could yield 4.1% in 10 months.

  • For GM, you can buy the stock at $26.50, sell Jan-2013 $32.50 strike calls and collect a premium of $1.05. This could yield 4% in 10 months.

  • For EMC, you can buy the stock at $29.01, sell Jan-2013 $35 strike calls and collect a premium of $0.79. This could yield 2.7% in 10 months.




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