How to Boost META’s $2 Annual Dividend to $650 a Year
Higher interest rates have certainly been good news for income investors – even if U.S. stocks aren’t always paying competitive yields.
Worldwide, dividend payouts jumped to a record $1.7 trillion last year, according to the Global Dividend Index report by asset manager Janus Henderson. Global dividends grew 5.6% in 2023 compared to the year before. And Janus also expects dividend payouts to jump another 5% in 2024.
About 86% of all listed stocks worldwide either boosted or maintained their cash dividend payments last year. These yields just tend to be higher for many stocks in Europe and select emerging markets than here in the U.S. of A., where we see the S&P 500 averaging a paltry 1.3% dividend yield.
Sure, some stocks pay much higher yields than the S&P’s 1.3%. The elite Dividend Aristocrats list of stocks that have consistently paid dividends over many years offers a yield of about 2% today. But that compares to short-term Treasury notes and money-market funds paying yields between 4% and 5% right now.
So, even the Dividend Aristocrats still don’t measure up too well with a safe 4% money-market yield.
However, there is an easy way to declare your own instant dividends and earn yields much higher than this. It’s a time-honored income-producing technique used by well-heeled investors including Warren Buffett and big Wall Street investment banks.
I’m talking about the cash income you can consistently earn by simply selling put and call options. I prefer to call these payouts instant dividends.
That’s because you can “declare” them anytime you want instead of waiting for the company to pay you quarterly. And you can earn these payouts on almost any stock – even stocks that don’t pay traditional dividends.
I have written previously about TradeSmith’s powerful Options360 tools that you can use to find consistent options trades on your own. But there’s an even easier way to get in on this strategy.
About a year ago TradeSmith began sending folks a Constant Cash Flow email every single day around noon. In this email there’s an exact stock listed, plus a specific option on the stock that you can sell to earn immediate cash income deposited straight to your broker account.
We just celebrated our one-year anniversary and so far, Constant Cash Flow has successfully closed out 329 winning trades out of 332 total (and counting). That adds up to an impressive 99% win rate!
Each email shows you exactly how easy it is to earn an upfront cash yield of about 3%, which is our average return on margin.
Granted, 3% may still not sound like much with money-market accounts paying 4% annually. But remember, it’s a 3% return on your money per trade, not per year.
And the average holding period of each of these trades is only about 20 days, roughly three weeks. That could easily add up to potential cash yields of 50% or more compounded over a full year’s worth of these easy trades.
If you subscribe to Constant Cash Flow, Trade360, TradeSmith Essentials, or TradeSmith Platinum, you already have access and can take full advantage of these moneymaking daily emails.
(And if you don’t see Constant Cash Flow in your TradeSmith Finance dashboard, simply call us at 888-623-0858 to learn more.)
But if you’re not familiar with this instant-income-generating product, let me show you just how easy it is.
Here’s an Example of a Live Trade Emailed for Constant Cash Flow Recently
This is exactly what the email looks like in your inbox:
It tells you everything you need to know to place the trade quickly, starting at the top with the most important info. Highlighted in blue is the exact trade to place:
Sell META $425.00 Put Expiring 05 April 2024
Meta Platforms (META) was trading at $514.69 on our trade date, March 8. That’s well above the option’s strike price of $425: 21.1% above, to be exact. That’s intentional – it’s how our system puts the odds of success in your favor.
Our proprietary Probability of Profit (POP) algorithm scans thousands of stocks, and tens of thousands of options, to find the handful of put options that have very high odds of success. In this case, high odds of this option remaining out of the money at expiration.
This trade had an 84% POP, which is outstanding. In other words, our algorithms said there was only a 16% chance of this option being in the money by April 5.
Scroll down a bit further in the Constant Cash Flow email, and you’ll find even more details on the trade in the Trade Notes section.
This section spells everything out for you in plain English. Selling this put obligates you to buy 100 shares of META at a cost of $42,450, but only if it declines to the strike price by expiration. And that’s a 21.1% drop. (META has moved down a bit since this alert went out.)
That’s an attractive discount if you do want to own META at an incredible bargain price. But we already know from our 84% POP that’s not likely to happen.
Besides, this trade, as with all Constant Cash Flow trades, is all about earning the $50 per contract instant income with a very high probability of not buying the stock.
And the bottom of this section of the email spells out your possible ROI – or return on investment. And this is where you realize the yield on this trade is actually higher than you think at first glance.
Earning $50 of instant income is a margin-account ROI of 1.16% (also known as its return on margin). That’s a bit lower than the 3% return on margin of the average Constant Cash Flow trade over the past year, and it may not seem like much at first glance.
But that’s 1.16% in just 28 days – the time until this option expires. If you placed similar trades every 28 days, it adds up to a potential 15.16% ROI for a full year.
Now, scroll down a bit further and you’ll see the Trade Analytics section of the email, shown below. Here’s where you’ll find the key statistics that help give Constant Cash Flow a 99% win rate, including the important Underlying Asset Price Forecast.
Again, this trade has a very high 84% POP and an ROI of 1.16% over just 28 days, which is its return on the net margin required for the trade. So, repeated over the course of a year, that’s 15% annualized. Plus, the max profit of $50 is an instant cash payout you earn for placing the trade.
These key elements are all in one spot, making them easy to find. So, you can evaluate the trade’s potential at a glance and quickly decide: “Is this a trade that I want to do?”
The underlying asset price forecast shows you visually just how high the odds of success are for each trade. The $425 strike price of the put option is circled in green: that’s the solid horizontal line.
The areas colored in different shades of blue give you our projected price forecast for META stock over the next 28 days through expiration (the dotted vertical line).
Our TradeSmith algorithms crunch thousands of data points every day including fundamental and technical data, seasonal trends, and trade cycle patterns for every single stock we track.
The result is this shaded cone that shows you the most likely price range of the stock. And, as you can see, almost none of the shaded area falls below the horizontal line.
In other words, there’s very little chance of META trading below $425 by expiration. That means you pocket the $50 premium after this 28-day trade, then move your money on to the next Constant Cash Flow trade.
And if you can earn an extra 50 bucks every 28 days by selling META put options, that adds up to $651 over a full year’s worth of similar trades. That sure beats META’s yearly dividend of just two bucks a share!
Mike Burnick’s Bottom Line: If you’re a regular reader of this column, then you know that I love dividend-paying stocks for the long run. Even if the yields are less than money markets these days, that’s OK, because I expect those dividends to grow over time. But if you’re also looking to earn reliable, short-term cash income – deposited straight to your brokerage account every day – then you should consider trying Constant Cash Flow and experience the money-making potential firsthand.
Good investing,
Mike Burnick
Senior Analyst, TradeSmith