Stock investment opportunities come every day in every market environment. Today’s stock investment chance is with Walgreens Stock. Walgreens stock symbol is WAG and it trades on New York. Walgreens stock is under pressure as same store sales for May were down 5% overall across the chain from the same period last year. As a stock investment, Walgreens stock represents a company that has revenue of 73 billion dollars in the last 4 quarters, a 26.3 billion market cap, has a low debt to capital ratio of just 13.91% which is below the industry average of 21.72% and pays a very healthy 2.95% dividend or .90 cents which against is above the industry average.
Walgreens stock dividend of .90 cents is just 28.5 times payout ratio so it is very secure. Between the dividend and covered calls Walgreens stock should make a decent stock investment opportunity if traded properly.
Stock Investment Walgreens Stock Negative News
On the negative side, as a stock investment Walgreens stock may take quite some time to see a return to higher price levels. Walgreens has lost market share over the past year and this year continues to show that same trend. May same store sales being down 5% is a reflection of the inability of Walgreens to grow their market share. Earnings per share is $2.93 and with the stock around $30.00, this marks a 10.4 X price to earnings ratio.
Stock Investment Strategy for Walgreens Stock
Walgreens stock is working its way back to 2010 levels when the stock traded between a narrow range of $27 to $29. The chance of this stock recovering into the mid $30’s levels is slim going forward unless Walgreens can turn around sales. Anywhere over $36 Walgreens Stock is definitely overvalued.
There are two strategies worth discussing on Walgreens Stock. The first is put selling the decline in Walgreens stock. For those investors wary of ever owning shares a bear put spread is the better choice. This means buying a protective put as well as selling a put. I am not interested in this strategy for Walgreens stock because as far as a stock investment goes, the decline in Walgreens stock I believe is easily managed through naked put selling or in the money covered calls which also earns the dividend.
Walgreens Stock may not be the best stock investment for long-term investors but it is worthwhile for put selling and in the money covered calls.
Put Selling Walgreens Stock
There are many ways to handle a stock investment. I do not however believe many stocks deserve a buy and forget it approach. Walgreens stock could be in for years of declines unless management turns around sales. While I wouldn’t expect overnight the company to fall apart, the gradual deterioration of earnings will grind the stock lower. At some point the put options premiums will not warrant put selling.
The chart below shows the strikes I would select for put selling Walgreens stock. With the stock poised this morning to fall below $30.00, the $29 put which is just two a half weeks away is trading for .22 cents or 3/4 of a percent. This is an exceptional return for a short period. I would consider this in small lots in case the stock continues to fall over the next week. By selling groups of 3 or 5 naked puts depending on the amount of capital an investor wants to tie into Walgreens Stock, this is a great investment strategy which combines short options expiration with taking advantage of the decline in the stock. This strategy can be repeatedly applied by waiting until three weeks before each successive month’s options expiry.
Put Selling Further Out On Walgreens Stock
Meanwhile I like the July $27 put which is trading for .36 cents this morning and makes a pretty compelling put selling case. While as a stock investment Walgreens Stock does not meet my criteria as it is continuing to show inability to lead in its industry, the put selling can easily be rolled lower if the stock falls as Walgreens Stock trades options in one dollar increments making rolling at these levels much easier. Rolling out and down means basically trading one put option strike for another put strike further out in time and at lower strikes.
Stock Investment Opportunity With Covered Calls
At $27.00, Walgreens stock is back trading at 2010 levels which is has not done since 2010. The next trading options strategy looks at, in the money covered calls on Walgreens Stock which as far as a stock investment makes a lot of sense. Select this link to view that stock investment article.