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Texas Instruments (NYSE: TXN - option chain) shares are rising today after the company announced it will lift its quarterly dividend by a penny to 12 cents per share. TXN has been growing its dividend steadily in recent years, which is a great sign for the company. Just a few years ago, Texas Instruments was paying about 2 cents per share quarterly. At the stock's current price, a $0.48 annual dividend represents a 2.0% yield. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on Texas Instruments.
TXN opened this morning at $23.79. So far today the stock has hit a low of $23.62 and a high of $24.00. As of 11:35, TXN is trading at $23.84 up 0.24 (1.0%). The chart for Texas Instruments looks neutral and S&P gives TXN a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $19 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.4% return in four months as long as TXN is above $19 at January expiration. Texas Instruments would have to fall by more than 20% before we would start to lose money.
TXN has not been below $19 since May and has shown support around $23 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in TXN.
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