The Arena

The S&P posted another uncomfortable decline today. I must say, I’m not loving that when the market falls my portfolio falls in stride like a world class sprinter but when the market rally’s my portfolio seems to be a toddler learning to crawl. Maybe I need to rethink some things. In any case, it does appear as if the bear will tighten its hold on the equity markets for now at least.

As a word of optimism, I did see an article today suggesting the Federal Reserve may just back down from aggressive rate hikes if we continue our current course. I would share it with you but I can’t seem to find it again. Looks like I didn’t feel it was worthy enough to actually click on. What do you think, will the FED drive the US into a recession? Magic 8 ball says, “reply hazy, try again!”

The Coach

With the host of unknowns currently in our face today’s consideration is probably not for everyone. However, Invesco Limited (IVZ) just announced a massive .90c per share dividend with an ex-dividend date of 7/8/22. With only 7 trading days until the ex date I’m considering a short term purchase plan to acquire 100 shares and initiate a covered call position. Generally, I’d prefer selling a put option to collect some premium before entering a position and running a covered call campaign, but the nearest term expiration doesn’t expire until after the dividend date.

With 100 shares, that’s essentially $90 free dollars in cash this close to the ex date. That said, with the market becoming increasingly questionable we may see another Thanksgiving day tantrum heading into the 4th of July holiday. In addition to the incredible one-time .90c per share dividend Invesco Limited pays a respectable .1875c per share dividend in most quarters for a yield of 4.3% by today’s market price per share. Invesco Limited has been paying and increasing their dividend since 2007, with exceptions for the financial crisis and the covid crisis.

From my analysis, Invesco Limited is a capable buy candidate. Add in the insane dividend payment and the opportunity to sell calls against the holding and from my perspective we’ve got a winner. Here’s some key insights from SimplyWall.St: Invesco Stock Overview.

Invesco Limited Stock Price Chart 6-29-22
Invesco Limited Stock Price Chart 6-29-22
Invesco Limited Fundamental Analysis
Invesco Limited Fundamental Analysis

The Attack

While Invesco isn’t without its share of risk going forward I think the above offers me just enough confidence to consider this covered call campaign. With a $90 dividend coming very soon, my cost basis will immediately drop from $17.10 to $16.20. In theory, the stock price should reflect the dividend payment immediately. However, in my experience, market forces seem to have a greater impact on the share price than the dividend payment. Not a guarantee, just an observation.

So you’re aware, the analysis spreadsheet above can score as high as 18 or 19 and anything above 15 I consider a “strong buy”. In this instance IVZ has a score of 12 so there is certainly more to be desired. Additionally, you can see my valuation and my criteria for placing an investment should you be interested. Furthermore, if you would like to receive that analysis spreadsheet its available for purchase and is included with the OptionBoxer Analyze and Journal Spreadsheet.

Does IVZ continue falling? Does it raise up with the juicy dividend? Or fall somewhere in between? Let me know in the comments below what you think of this one.

Moderately bullish assumption

Buy To OpenSell To OpenEntry OrderTotal RiskProb. of 50% Profit
25 Shares – June 29, 2022$17.10$427.5
25 Shares – June 30, 2022Market Price?
25 Shares – July 1, 2022Market Price?
25 Shares – July 5, 2022Market Price?
July 5, 202219 AUG 22 19 Call$25-$45.00Total Share Cost89%

Don’t Care but Bullish

Buy To OpenSell To OpenEntry OrderTotal RiskProb. of 50% Profit
100 Shares – June 29, 2022$17.10
19 AUG 22 19 Call$35.00$1,675N/A

Bearish Assumption

Buy To OpenSell To OpenEntry OrderTotal RiskProb. of 50% Profit
19 AUG 22 20 Call19 AUG 22 19 Call$20.00$80.0081%

God Bless,
Jeff

*This post is NOT a recommendation to buy, sell, or trade any security. The information provided within is strictly for entertainment. Traders or investors should always consult a registered financial professional prior to trading or investing.