A Sneaky Way to Get a T-Mobile Dividend

your Strike Price issue T-Mobile Doesn’t Pay a Dividend. So What? Here’s How to Create Your Own [By Jon Lewis] By Jon Lewis Thursday, September 8, 2022 Barron’s ran an article last week touting T-Mobile as the go-to stock in the wireless arena. “It’s Time to Buy the Stock,” the headline proclaimed. The article lauded the company for its acquisition of Sprint and its leadership in the 5G race. TMUS now boasts more subscribers than AT&T (T). Profit margins are expanding. Most of all, the stock is up 24% this year. What’s not to like, right? Well, there is one thing that I discovered really bugs people. I found it in the Comments section after the article (you can learn a lot from these comments). TMUS pays no dividend. In fact, this was a common complaint among several commentors. Competitors Verizon (VZ) and T pay dividends that yield more than 6%. That’s always been one of the main selling points of these stocks. In fact, maybe it’s the only selling point since both are trading about where they were 20 years ago. TMUS, on the other hand has nearly tripled since it debuted in 2007. OK, so TMUS doesn’t pay a dividend. Let’s put aside the fact that it’s crushing the dividend payers in performance. If you like TMUS but still want a dividend, why not just create your own? Better still, what if you can buy TMUS for less than a quarter of the current price and keep the dividend? You can with the poor man’s covered call (PMCC) strategy. Let’s start with buying TMUS for a huge discount. You can do it by buying a long-term call option (known as a LEAPS) that expires in January 2024. I like to buy a LEAPS that is in the money (the call’s strike price is below the stock price). Options that are in the money are more responsive to the stock price, meaning that I can better leverage TMUS’s projected upside. With TMUS currently trading around $145, I can buy a 130-strike call that expires on Jan. 19, 2024, for $32.50 (this means your cost will be $3,250). At expiration, TMUS must trade above $163 for the LEAPS to be profitable. But that’s only 13% above the current price. And the stock has 16 months to make up that relatively modest ground. But what about the dividend? Here’s where the PMCC really shines. We can sell short-term call options against the LEAPS to create a perpetual income stream, much like a dividend. But we’re not limited to just getting a quarterly payment … we can ring the register as often as every week if the stock has options that expire weekly (TMUS does). I prefer selling out-of-the-money (OTM) calls (strike price above the stock price) to avoid the possibility of getting assigned. Plus, OTM options have no intrinsic value (the amount the strike is below the stock price). The premium is only made up of time value, which will wither away to zero at expiration. That’s the ideal situation - the short call expires worthless or is bought back for little cost. Then, we can open a new short call and take in more premium (this is called “rolling out” the call). I like going out about a month with my short calls. This can bring in significant premium with each rollout. Plus, I can do these monthly short call rollouts 15 times before I have to roll out the long call. For TMUS, I can sell the 150-strike call that expires on Oct. 14 for around $2.90. I can do the two trades together – buy the 19 Jan 2004 130 call and sell the 14 Oct 2022 150 call - for around $29.50, or less than $3,000 (this is called buying a “diagonal spread”). Ideally, I can whittle down the cost of the long call by a couple of hundred dollars every month by selling short-term OTM calls, bringing the net cost for the LEAPS call down to near zero by the end of 2023. Keep in mind that while we’re lowering the net cost of the long call (or using the monthly “dividends” for something else), the value of the long LEAPS will rise if the folks at Barron’s prove correct about TMUS. Thus, there are two ways to benefit from the PMCC strategy – income from selling short-term options and the capital appreciation of the LEAPS call. This is the strategy I use in [my Profit Multiplier Pro service]( which currently has 22 stocks and ETFs in three portfolios. This is not a stock-picking service. Quite frankly, I’m a lousy stock picker … though no worse than most everyone else. Instead of wasting time picking the hot new stock, I prefer to leverage the characteristics of options by buying and selling premium with a longer-term goal of accumulating credit every month. It’s the best way I know of being successful in the long run. To find out more about PMP, … [Click here.]( Trade Wisely, [Jon Lewis] Jon Lewis [Visit WyattResearch.com]( [Take a 7 day break from these emails]( [Unsubscribe from these types of emails]( [Manage your email preferences]( [Wyatt Investment Research] Disclaimer & Important Information [Wyatt Investment Research (“WIR”)]( owns and publishes the website WyattResearch.com, other web sites, and, through its subscription services, various investment newsletters, trade alerts, and other investment-related educational materials. Those publications are informational in nature – WIR is not your financial adviser and does not provide any individualized investment advice to you. You should perform your own independent research on potential investments and consult with your financial adviser to determine whether an investment is appropriate given your financial needs, objectives, and risk appetite. 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