5% Rule/Jeddah - That would be fun. Make sure you attribute it though. Look at all the mileage Laffer gets off his father's work.
So it turns out NLY sold their CRE to Slate for $2.3Bn as they think it's a good time to double down on RMF. My whole premise on NLY over the years is like HOV - trust the management to know what they are doing and take advantage of the ups and downs. $8.50/share for NLY is $12Bn and they should make $1.45Bn this year and distribute 90% of it (because they are a REIT) so 0.88 dividend makes perfect sense.
So, for the Dividend Portfolio, let's:
- Buy 2,000 shares of NLY $8.63 ($17,260)
- Sell 10 NLY 2023 $10 puts for $2.75 ($2,750)
That's net $14,510 and we're not selling calls yet because the 2023 $7 calls are only $1.75 so we'd get called away for sure and I think we'll be able to get $1 for the $10 calls if we are patient. If NLY drops to $7, we sell the $7 calls for $1 ($2,000) and our net drops to $12,510 ($6.255/share) and then we wait to see how things go until we are able to roll the short puts to 2024.
CIM has way better premiums and the same management team as NLY. They were stupidly cheap in the fall and now fairly priced at $12.70, which is $3Bn for a company that made $88M last year but usually more like $400M and projecting $300M going forward:
| Year End 31st Dec | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021E | 2022E | CAGR / Avg |
|---|---|---|---|---|---|---|---|---|---|
|
$m
|
950 | 952 | 1,148 | 1,271 | 1,381 | 1,197 | 498 | 513 | 4.74% |
|
$m
|
250 | 552 | 525 | 412 | 414 | 89.0 | -18.7% | ||
|
$m
|
250 | 552 | 525 | 412 | 414 | 88.9 | 317 | 327 | -18.7% |
|
$
|
1.25 | 2.92 | 2.61 | 1.96 | 1.81 | 0.067 | -44.4% | ||
|
$
|
1.62 | 3.23 | 3.12 | 1.94 | 1.79 | 0.307 | 1.26 | 1.30 | -28.3% |
|
%
|
-45.1 | +99.3 | -3.37 | -38.0 | -7.87 | -82.8 | +311 | +3.25 | |
|
x
|
41.4 | 10.1 | 9.75 | ||||||
|
|
0.133 | 3.10 | |||||||
We're not going to play them for growth and we're more likely to have to DD on a dip than NLY so this will be for the LTP, where we have tons of cash:
- Buy 3,000 shares of CIM for $12.65 ($37,950)
- Sell 20 CIM 2023 $12 puts for $12.75 ($2,550)
- Sell 30 CIM 2023 $10 calls for $3 ($9,000)
That's net $26,400 or $8.80 per share so if we're called away at $10 we don't care as $1.20 is a year's dividend.
