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- How I plan to make up for "Dividend Losses" with Intel
How I plan to make up for "Dividend Losses" with Intel
Using Options (wheel strategy) to increase ROI
Intel ($INTC) recently announced 'dividend cuts' on Feb 22, 2023 to $0.125 per share (or $0.50 annually) on the company’s common stock.
"Prudent allocation of our owners’ capital is important to enable our IDM 2.0 strategy and sustain our momentum as we rebuild our execution engine. We remain on track to deliver five nodes in four years and continue to expand the IFS (Intel Foundry Services) customer base. We are well into the ramp of 13th Gen Intel® Core™ and 4th Gen Intel® Xeon® Scalable processors, and we look forward to the launch of Meteor Lake and Emerald Rapids in 2023 and Granite Rapids and Sierra Forest in 2024."
The dividend will be payable on June 1 for shareholders of record May 7; ex-div May 4.
Dividend History:
Intel (INTC) started paying dividends in 1992 and has consistently raised its dividends. However, this is their first dividend cut since 2000. Check out the full payout history here.
Seeking Alpha has rated them as D for the dividend safety score and most of the categories have received poor ratings. If the upcoming quarterly performance does not improve, we may see additional dividend cuts along with further downward revisions.
What I am doing as a shareholder:
When I published my last video on Intel (After the horrendous Q2 2022 results, is it time to SELL Intel ($INTC)?) I specifically talked about their performance and potential upcoming dividend cuts. You can check out the video in the section below.
At the time I made this video, I had decided to not invest in Intel because the stock has -
The stock has been trending downward since May 2021
Has not hit its all-time high since Oct 2000
Competitors like AMD, NVIDIA are gaining market share across different segments
However, due to the recent decline in stock prices and a healthy options volume/expirations, Intel presents itself as a great candidate to be used for "Wheel Strategy". In this video I go over the exact steps on this strategy and trade -
Tracking my trades:
I opened my first CSP contract with a strike price of $24.50 on Feb 27, 2023 and expiration on March 2, 2023 that earned me a premium of $28.
The above contract expired out of the money since the stock ran up to $26.
On March 6, 2023, the stock was trading around the $26 range, and the weekly premiums for $24.5 strike price were very low. Hence, I decided to open a new CSP contract at $26 strike price expiring on March 10, 2023 and earned $30 in premium.
However, that week had multiple negative news for the semiconductor industry that led to the stock price sliding to the lows of $25.51 on March 7, 2023.
I saw an opportunity to roll my contract to a week later to earn additional cash instead of risking the assignment of 100 shares of Intel at $26. As I rolled the contract, I had to close the 1 leg of the contract by buying the CSP at $49 and then opening the second leg by selling the CSP for $70. As I had already received $30 earlier, my net gain was $51.
At the time of this publication, I had generated 3.1% ROI in over 3 weeks of trading with Intel.
Conclusion:
At the current moment, I have not executed the second leg of the wheel strategy i.e. Covered Call, since I have not been assigned the stocks. My goal is to get assigned before May 4, to take advantage of the dividend payout.
I will be publishing a bi-weekly update on this trade, so if you do not want to miss out, consider subscribing to this newsletter.
Public Portfolio 📈
Buys (at the time of publication):
No buys
Sell (at the time of publication):
No sell
Dividends (at the time of publication):
$16 from Ford on March 1, 2023
Options (at the time of publication):
No open position
Public Portfolio Spreadsheet can be found here
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