9 Mar
Unusual Way I Got Altria’s Dividends 52 Days Early!
Options. That’s how.
Thanks for reading, have a good evening and a good night!
All kidding aside, I sold a “Cash Secured Put.” If you have no idea what that is, I strongly recommend clicking the link for an explanation before going any further.
Now that you’re all caught up (I hope), you know that I did this without actually owning shares of Altria, therefore a dividend wasn’t TECHNICALLY received.
But, in principle, this is as good as receiving a dividend almost two months early – let me explain.
I recently had a covered call option assigned at $52.00, with an average around $48/share – a gain of almost $400, plus the $30 I received in premium.
I wasn’t expecting Altria to breach the $52 level, but nevertheless I’m down 100 shares of the Altria (MO) that I would like to continue holding.
As of this writing, Altria was down from $53.25 to the $51.50 area and I identified $50 as support, where I believe it will test in the coming week or so.
In an attempt to get my “lost” Altria shares back, and at a better price from where I sold them at, I sold a cash secured put with a $50 strike, for $1.26, expiring on 3/25/22 (see Below).
Source: Charles SchwabWhen I sell covered calls or cash secured puts, I do not like them to be over 45 days maximum – there’s too much time for the market to move against my thesis.
In total, I received $125.35 in premium (less the $0.65 Schwab options fee), which hit my account IMMEDIATLEY and is mine to keep no matter what happens.
As far as taxes go, this will be taxed as ordinary income, but will be done so upon the expiration of the contract or if the shares are assigned (if selling covered calls). Fidelity has a great tax implications article HERE.
Lastly, I picked this contract because of the upcoming Atlria dividend (see NASDAQ.com table below.)
Source: NASDAQ.COMNow, for the 10% yield part – how can that be when Altria’s dividend is currently 6.73%?
Funny you should ask – I received $126, or $1.26/share. If we work that out over the course of a year, we get ($1.26 x 4) ÷ $50.00 = 0.1008 x 100 = 10.08% yield.
This of course assumes a $50 share price, as I had to have $5,000 in my account in order to sell the cash secured put.
If I have the shares assigned to me, it will be after the ex-dividend date of 3/24/22, where the share price is guaranteed to open up down at least $0.90.
For more on how the ex-dividend date works, check out Investopedia’s article HERE.
Because I know the stock will be down, there is a higher likelihood of assignment, so I wanted to sell a cash secured put for at least the dividend amount, as if I had the shares.
I am accounting for taxes, so I got a touch greedy and went for a bit more juice above and beyond the $0.90/$90.00 as those dividends would have been qualified and taxed lower than the option income I received.
That’s pretty much it – a bit of pretending and stretching the limits of plausibility to arrive at receiving the Altria dividend 52 days early (they record who is owed the dividend on March 25th and pay on April 29th).
But nevertheless we should seek creativity and just having FUN while investing.
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Cheers and never stop investing in yourself!
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