How to jack up a high dividend stock

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T is a high dividend stock

ATT (T) is a giant utility.  T along with INTC and QCOM are pumping out some hefty dividends.  I don’t normally write about dividend paying stocks and strategies but I own a bunch of them.  T pays over 6%, INTC 2.9% and QCOM 3.6%. SPY is off 3% from highs but these are some nice payouts.  Even JWN today after poor earnings yields 4.3%.  Somewhere along the way earnings growth caught up to the SPX after the financial crisis since companies are paying dividends

Trade Wars equal sideways action

Right now the Trade War is dragging into its second year and the end is still not in sight.  We hit all-time highs on a possible resolution and I am sure will do that again if we get a sniff of it happening.  In the meantime the big upside seems gone.  Long term strategies that avoids buying short term volatility might work better.  We seem to be a headline away from down 1% on a daily basis and that is why VIX is where it is just under 15.

T strangles look cheap in January

Screenshot by Cboe Livevol

Buying long term strangles in high dividend stocks

I think T has a decent chance to become an un-utility if it can integrate the Time Warner purchase.  The potential there is quite large.  5% dividend pays for a lot so that is $1.6 in notional T.  T moved $2 in the last week.  A way to jack up T returns is to buy strangles instead of selling them and just trade around the positions.  Long term Jan calls are very cheap because T pays such a high dividend but that won’t matter if T goes to $35.  It was $34 in November.  In the meantime one can write calls after rallies.  Jan2020 33 calls and 29 puts with 100 shares per 1 strangle looks like a way to make nice dough this year.  Check out the other low vol, high div stocks.  6 months is a long time, remember December?

Disclosure: Positions in T, INTC, SPY, QCOM

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