Earlier this week I sold two cash secured puts for Lbrands Inc. This morning I decided to buy 100 shares and sell a covered call. Retailer stocks have been hit hard this year, especially so the past 30 days. Amazon is kicking everyone’s’ butts. L Brands is suffering too. The company stock is hovering just above its 52-week low at $45.30. This is $2.26 above the 52-week low and $34.37 below its 52-week high.
The puts I sold week at strike prices of $35 and $40. I don’t think the stock will fall to these levels and I’d like to own shares. Because of this I bought the 100 shares today at $45.30 and a $1 transaction fee. Total purchase price was $4,531. This new stock will increase my annual dividends by $240. This will take me above my 2017 goal of $7,500 in annual dividends.
L Brands usually pays an annual special dividend either in Q1 or Q4. The company hasn’t paid this dividend yet this year. I’m hopeful that a special dividend is paid in Q4. This will just be more whipped cream on top of my dividend sundae. The chart below shows these special dividends. from 2010 to 2016 L Brands has paid this dividend every year with exception to 2012.
L Brands special dividend amounts over these years has been the following:
- 2010 – $3.00
- 2001 – $3.00
- 2012 – $4.00
- 2013 – $0.00
- 2014 – $1.00
- 2015 – $2.00
- 2016 – $2.00
L Brands Covered Call
I bought the 100 shares and immediately sold a covered call. There’s decent premiums on both sides of the options market for this stock, which is why I decided to buy shares and sell this covered call. The details of my covered call are as follows:
- Contract Length: 127 Days
- Expiration Date: 11/17/2017
- Opening Fees :$1.10
- Strike Price: $50.00
- Premium: $1.80
- Potential ROR: 10.28%
- Potential Profit: $178.90
Combining my premiums from the two puts I sold earlier in the week, I’ve made $387.70 in premiums. If I let these expire, my per share cost basis of L Brands stock is $41.43. I’ve updated my options tracker to account for this last covered call. I now have 15 open contracts, representing potential revenue of $4,437.
L Brands Inc Business Summary
L Brands, Inc. operates specialty retail business. The Company is focused on women’s intimate and other apparel, personal care, beauty and home fragrance categories. Its segments include Victoria’s Secret, Bath & Body Works, and Victoria’s Secret and Bath & Body Works International. It sells its merchandise through company-owned specialty retail stores in the United States, Canada, the United Kingdom and Greater China, which are mall-based; through Websites, and through international franchise, license and wholesale partners. It operates in the retail brands, which include Victoria’s Secret, PINK, Bath & Body Works and La Senza. La Senza is a specialty retailer of women’s intimate apparel. It sells its La Senza products at over 120 La Senza stores in Canada. Henri Bendel sells handbags, jewelry and other accessory products through New York and 28 other stores. Mast Global is a merchandise sourcing and production function serving the Company and its international partners. Source: www.schwab.com.
L Brands Companies
L Brands operates 5 brands. The most notable brands are Victoria’s Secret, Bath and Body Works, and Pink. Other brands include La Senza and Henri Bendel. Victoria Secret ranks #1 worldwide in bra and panty sales. Victoria’s Secret’s Pink spin-off has doubled its revenue over the past 5-years. Pink focuses on the teenage market, where it has massive brand appeal. Bath and Body works ranks #1 in the U.S. in multiple sales categories; most notably candles, body lotions.
L Brands Dividends and Growth
- Annual Dividend Yield of 5.43%
- 5 Year Average Dividend Yield of 2.43%
- Annual Dividend Rate (IAD) $2.40
- Payout Ratio (TTM) of 62.73%
- Dividend Coverage Ratio (TTM) of 159.42%
- 5 Year Dividend Growth Rate of 24.6%
- 10 Year Dividend Growth Rate of 14.9%
Do you own L Brands stock? Are you buying any retailer stocks or avoiding them due to Amazon’s growth in this space?